Remedies Outline

Professor Sanchez
MODERN LAW OF DAMAGES
o Damages are legal
o Substitutionary relief
o Are always awarded in the form of money
o Measured by Plaintiffs loss (as opposed to restitution which is measured by
Defendants unjust enrichment NEVER award damages for unjust
enrichment)
Overview of Kinds of Tort Damages:
1.

Compensatory: is an amount to make the P whole by compensating him for

actual losses where a tort is involved or for his lost expectancies if the
relationship was a consensual one.
o In tort cases, the injury must be the proximate cause of the damages and the
P is entitled to all compensatory damages proximately caused by the tort. It
is an amount which will restore the P to the pre-tort status (backward looking)
o In contract law, compensatory damages is an amount that will put the parties
in the position they would have been in had the K been performed. A term
that encompasses both general and special (consequential) damages, but
excludes punitives. The P is entitled to all compensatory damages
foreseeable at the time the K was entered into.
o General damages: (non-economic) these do not have to be specially
pled. They naturally arise from the tort or breach of K includes such
elements as pain and suffering, loss of enjoyment of life and lost earning
capacity, disability and disfigurement.
o Special (consequential) damages: must be specially plead to be
recoverable; include such damages as loss of earnings (wages) and
medical costs. Special damages are synonymous with consequential
damages or indirect damages (while general damages are direct)
To be recovered, special damages:
1. cannot be too remote from the injury
2. there must be a causal relationship (But for) between the
injury and the damages
3. they must be proven with a reasonable degree of certainty
o Tort: restore P to pre-tort status (backward looking). P is entitled to all
damages proximately caused by the tort.
o Contract: amount to put the parties in the position they would have been in
had the K been performed. P is entitled to all damages foreseeable at the
time the K was entered into.
o Economic = measured by pre-tort life expectancy

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o Non-economic = Post-tort life expectancy

2.

Nominal damages: These are awarded in certain cases where there is no

specific harm and only the establishment of a right is involved. Usually, the P
does not seek only nominals, but the court after finding no compensatory
damages awards these. A token amount awarded for some torts (trespass to
realty and conversion) and for some breaches of contract.
o Certain causes of action require proof of actual damages, so nominals cannot
be awarded. Thus, not awarded for fraud, negligence, or trespass to chattels
because injury is part of the prima facie tort (i.e., without the injury, there is no
tort).

3.

Punitive Damages (exemplary): are considered non-compensatory damages.

Are imposed to punish or deter and are awarded bc the D has acted in a manner
which exceeds the normal standards of decent conduct between the individuals.
o Showing of actual malicious and wanton conduct required i.e., must show
that the D acted with malice or reckless disregard.
o An award over and above compensatory damages.
o In many states, the case for punitive damages must be proven by clear and
convincing evidence.
o Without compensatory damages, there can be no punitive award. No
punitives if only nominals are awarded.
o Most likely get them for intentional torts (not in K, unless and with the
exception of bad faith).
o Can get it under damages or restitution.
o Emotional Distress Damages: usually awarded in intentional torts, mostly
nuisance

4.

Liquidated Damages: an amount agreed upon by the parties to a K, contained

in the contract and is awarded in lieu of actual damages. Disfavored in the law; if
a liquidated damages clause is struck down as a penalty, the P must prove actual
damages.
o A valid liquidated damages clause reflects:
o 1. That at the time the K was entered into, it was next to impossible to
estimate what damages would be in the event of breach; and
o 2. The amount agreed upon is the best estimate of what those
damages would be and is reasonable
o Not awarded in tort action
o First look or second look (the amount in the clause must be reasonable at the
time of the contract formation and the time of breach)

5.

Interest: usually governed by statute. Not granted on any amount of bodily

harm, emotional distress, or for injury to reputation.
o Pre-judgment: is measured from the time the claim was due until judgment
entered. Need to be certain as to amount owed for breach of K, not in tort,

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because the sum is more likely known (i.e., the sum is liquidated/certain in
amount) amount owed between date cause arises and date judgment is
entered by the court (amount owed must be liquidated definite and certain)
Not entitled to pre-judgment interest in PI suits because the amount is not
known. Most common in K cases. Discounting decreases plaintiffs recovery
6.

Attorney Fees: not available unless provided by statute or K. There is no

blanket authority for the recovery of attorney fees. American Rule provides that
each side pays for their attorney fees. Exceptions: class action suits.

7.

Rules affecting recovery of Damages:

a.
Avoidable consequences rule (mitigation of damages steps the
injured party can take to reduce or eliminate damages way of reducing
Ps recovery) says P cannot recover any special damages which he could
have avoided by reasonable acts expenditure. The theory behind this
rule is that of economic waste and the D has the burden of proving that
the P should have minimized. It applies to both torts and K.
b.
Collateral Source Rule (only invoked by P) unlike the above, it may
work to the detriment of the P, it may work to his benefit provided that the
P receives benefits from a source collateral (insurance) to the D in either
tort or K. D cannot use this source to reduce his liability for damages,
unless the collateral source came from the D himself. (to increase Ps
recovery)
c.
Liquidated damages contracting parties can agree on a method for
determining damages in the event of a breach of K. This is usually done
where the damages are very difficult to determine and the amount agreed
upon is a reasonable forecast of just what the damages will be. There are
valid unless the court decides them to be a penalty. Penalty would be
where the amount agreed to is unreasonable and grossly disproportionate
to the actual losses.
d.
Economic Loss Rule absent contract or injury to person or property, P
may not recover in negligence for economic loss. This is a policy
argument; limits liability and based upon the level of culpability (i.e.,
negligence is a low level of culpability)
e.
Proximate Cause Limitation in Tort Cases an injured person is
entitled to be compensated for all injuries proximately caused even if
those injuries could not have been foreseen by the wrongdoer and even
though the injury is increased by plaintiffs particular condition. Proximate
cause relates only to the issue of liability, i.e., it does not act as a limit on
damages.
f.
Consequential Damages Limitation The rule of Haley v. Baxendale:
the rule limits special damages in breach of K cases to those arising
naturally from the breach or within the reasonable contemplation of the
parties at the time the K was made.

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WAYS OF MEASURING DAMAGES:

1. Cost to repair (most often associate with torts)
2. Diminution of value (most often associate with torts) this is the difference
between the pre-tort and post-tort value of the property
1. If both cost to repair and diminution of value both yield zero then the P is
entitled to nominal damages
2. Quasi contract
3. Rental value (can be a measure of damages or quasi-K)
4. Lost business profits (often challenged as too speculative (means you lose)
unless such damages can be established with reasonable certainty like mediation.)
5. Contract damages: aims at putting the parties in the position they would have been
in had the K been performed.
a. out of pocket damages:
b. benefit of the bargain: diff btw KP and the FMV of Property at the time of the
breach (majority rule for breach of K)
6. Fraud damages (often measured in either of two ways)
a. Out of Pocket: difference btw K price and FMV of goods
b. Benefit of the Bargain: diff btw FMV and the Value property would have had the
representation been true
7. Conversion damages: (also known as forced sale) are almost always measured by
the fair market value of the property at the time and place of the conversion. When
the judgment is paid, title vests retroactively in the D, court splits over whether P is
entitled to pre-judgment interest
o Restitution and damages are mutually exclusive cannot get both restitution
and expectation damages
o For rescission, have to show a material breach
o For specific performance, have to show an inadequate remedy at law (usually
uniqueness land Ks)
o The law of K recognizes three interests:
1. Restitution /rescission Ds unjust enrichment. You get back what you
paid
2. Reliance (out of pocket and consequentials) loss from relying on duty of
other, not related to the other party
3. Expectations (damages or specific performance) Ps loss. What did
they expect from the deal
Existence v. amount of damages: Existence goes to the COA (causation); Amount
goes to the remedy

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THE NATURE OF LEGAL DAMAGES:

GAVCUS V. POTTS (17): COA: trespass to realty and conversion (stepdaughter came
into the house and took valuable coins). Remedy: Damages. No physical injury to
property proven so no direct damages.
Trespass to land is the unauthorized physical entry into the land of another:
actual damages not required. Indirect and direct need to be proven. Nominal damages
allowed.
Conversion of chattels -- intentional, substantial and unreasonable interference
with the personal property of another. Do not have to show actual damages. Ps
option is of forced sale or return of property.
o Common law rule American Rule with regard to attorneys fees each party
pays their own attorneys fees
o Indirect damages of mental distress not proven.
o No punitives w/o compensatory damages, i.e., must prove
actual/compensatory damages to obtain punitives.
o Exception to American Rule: Attorney fees recoverable if prior litigation was
between P and a 3rd party and prior litigation was the proximate result of Ds
wrongful act.
o Could also recover consequential damages which are the natural and
proximate result of the trespass (need proof/evidence of mental distress by
either a physical or mental manifestation)
o injunction is always a remedy you associate with a trespass to chattels
(injunction prevents future harm)
o Emotional distress is available as special damages in a trespass to realty
case
o Two traditional measures of tort damages - Cost to repair and diminution of
value
5 Remedies Associated with Conversion
1. Replevin legal restitution
2. Damages
3. Quasi contract
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4. Constructive trust
5. Equitable Lien
PROOF OF THE EXISTENCE OF DAMAGES
DURA PHARMACEUTICALS Inc v. BROUDO (20)
COA: Securities Fraud: intentional (with wrongful state of mind)
material misrepresentation in connection w/ sale of security, w/
reliance. Is claim sufficient? Plaintiff purchased stocks; D omitted known
facts in sale, and P relied. Economic loss and loss causation sufficient to
send to trial.
o Damages are a substantive element of the COA. No actual damages, no
award of damages. Damages go to COA. Amount of damages goes to the
remedy. Once you prove the existence, law makes it easy to decide amount.
o Whenever unjust enrichment is the COA, some sort of restitution will be the
remedy
o Damages are measured by Ps loss
o Prima Facie Case of Fraud
1. Scienter
Affirmative lie
Active concealment
Silence (where there is a duty to speak)
2. A Material misrepresentation of a material fact
3. Reasonable Reliance
4. Causation
5. Injury
YOUST v. LONGO (25) - Horse Race Case.
COA: Intentional Interference with Prospective Economic Advantage must prove
reasonable probability but for the Ds conduct. Proof that it is reasonably probable
that the lost economic advantage would have been realized but for the Ds
interference.
Prima Facie Case for Intentional Interference with Prospective Economic Advantage:
2 Parts to an Injury
1. The existence goes to the COA
2. The amount this goes to the damages
Compensatory and punitive damages were sought (because sought punitive also this is
an intentional tort). Substantial certainty or high probability of success. Causation was
the issue in this case as opposed to the amount of the remedy.

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o Plaintiff has the burden of proof by preponderance of the evidence standard;

this is the most often cause of ps losing.
o Courts are stricter in what is required to prove COA; but more lenient where it
comes to the amount of damages.
Thus, there must be proof sufficient to establish a probability of loss although it is
usually not necessary to prove the amount of damages with mathematical
certainly. The certainty requirement is most often controversial in loss of profits
cases. A claim for future damages requires proof that there is a better than 50-50
change that such damages will occur.
Levels of Culpability
1. Intentional
2. Reckless, willful and wanton
3. Gross Negligence
4. Negligence
5. Strict Liability
HENRY v. DOW CHEMICAL COMPANY (30)
Client negligently released Dioxin, can result in horrible illness, death. P is class that
lives & works there. Can take years after exposure to show illness. No member of the
class is presently ill. Is fear of future illness itself an illness? Have to have a physical
illness for case to proceed.
COA: personal injury (negligence) (needed to prove more likely than not you will get
illness)
Negligence can occur in 3 ways negligence resulting in injury to:
1. People
a. Personal injury
b. Wrongful death
c. Survival actions
- The only remedy is some form of damages
2. Personal property
3. Real Property
Prima Facie Case for Negligence Duty, breach, causation, injury (damages)
REMEDY: Damages, Medical monitoring (equitable remedy like an injunction which is
to prevent future harm, medical monitoring is also in place to prevent future harm)
ISSUE:
o Injuries are in prima facie case (negligence) no nominal, no punitive

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o The injury was too speculative, therefore no recovery. Must be able to show
that risk is more probable that not (>50%). No nominals in negligence w/o
actual injury.
o Once a Dr determines that a member of the class is in early stages of the
illness, its equitable because it prevents further injury then remedy is
medical monitoring
o Tort damages are backward looking they put the plaintiff in the position
they were in before the tort occurred
o Contract damages are forward looking to put the parties in the position that
they would have been in had the contract been performed
o Dissent: Injury is emotional distress. Policy reason for imposing limitations on
Dows liability: level of culpability
PROVING THE AMOUNT OF DAMAGES
LOST BUSINESS PROFITS: proof required for these damages
ATKIN WRIGHT: Telephone number problem COA: negligent interference with
prospective business relationships; remedy sought was general and punitive damages.
P did not prove lost income was caused by Ds intercept. Here, it was all too
speculative, there was no proof of 3 months of lost net income
o Negligence is a sort of midlevel culpability
o Must prove injury
o Nominal damages not available
Requirement of Certainty: means that in order to recover damages, there must be
sufficient proof to show that P actually suffered some damages.
Uncertainty of Amount: is not fatal. Courts have held where the fact of damage is
certain, the exact amount therefore need not be.
LOST CAPACITY TO EARN .
WASHINGTON v. AMERICAN COMMUNITY (48):
COA: personal injury (negligence stemming from a car crash); liability is not an issue.
Remedy: damages (divided into special and general): economic: lost earning capacity is
special as is medical bills while pain and suffering and loss of enjoyment of life fall
under general. Was a wrestler with an outstanding record. There was sufficient
evidence to award lost earning capacity.

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GENERAL DAMAGES (non-economic)

Loss of earning capacity is distinct from loss of wages, salary or earnings, is a
separate element of general damages. Impairment of earning capacity is an item of
general damages and proof may be had under general allegations of injury and
damage. Proof of an actual loss of earnings or wages is not essential to recovery for
loss of earning capacity. Recovery for loss or diminution of the power to earn in the
future is based upon such factors as the plaintiffs age, life expectancy, health, habits,
occupation, talents, skill, experience, training, and industry. What if the forced
circumstances result in greater future earnings, does it cancel out recovery?
SPECIAL DAMAGES (economic) They must be specifically plead
1. Medical Bills
2. Loss of past earnings is an item of special damages and must be specifically
plead and proved.
o Lost earnings refers to actual track record of work
o Special must be plead specifically
o General do not have to be plead
o What facts give rise to a lost earning capacity in a hypo: students for instance
Can you recover for loss of earnings and lost earning capacity?
o you may be able to recover under both
General Damages
Pain and suffering
Lost earning capacity
Loss of enjoyment of life

Special Damages
Medical bills
Lost earnings

CHILDS v. U.S.
COA: wrongful death under the Federal Tort Claims Act and Georgias Wrongful death
statute. Remedy: damages (funeral and medical expenses are not at issue)
o economic value on the loss associated with decedents deaths based upon
their lost future income, fringe benefits and household services; these
amounts must be discounted because can be invested. Court held that it may
consider the economic losses as well as any non-economic intangible losses.
3 Causes of Action
1. Personal injury
2. Wrongful death (by statute)
o the plaintiffs in a wrongful death claim are the dependents of the decedent
3. Survival action (by statute)
o the plaintiff is the estate of the decedent and will recover whatever the
decedent would have recovered had he or she not died
Damages Available in a Wrongful Death Case
1. Support lost earnings
2. Services care of the home: cooking, other household chores
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3. Society companionship
In valuing the decedents lost future income, all experts used the following four
elements in making their calculations:
(1) Base-year or entry level income the decedents initial actual or projected
before-tax income
(2) Income growth rate the income growth rate reflects the fact that the baseyear income will grow over time as a result of inflation, productivity gains and
progression in ones career
(3) Work life expectancy the probable length of time a person would have
remained in the workforce, taking into account periods of voluntary and
involuntary employment
(4) Discount rate because income earned in the future is less valuable than
income earned today, the discount rate is used to calculate the present value
of a decedents future income loss.
In addition to these elements, the doctors appraisals included two other
elements: personal tax offset and personal expense/consumption offset.
These elements simply reflect the fact that some portion of the decedents
income would be lost to the decedents personal consumption and to income
taxes.
Discounting: Future economic damages are discounted to present value (not noneconomic) (past damages because they have already accrued are not subject to
discounting) (typically, discount rate is 6%). Some courts exercise total offset rule
interest rate cancels out inflation. District Court retains discretion.
NON-ECONOMIC LOSS: an injured party may recover for past, present, & future noneconomic losses. These losses are generally referred to as general damages, whereas
economic losses are referred to as special damages.
Physical Pain: P is entitled to recover for pain and discomfort caused by injury.
No guidelines. The jury must merely determine what is adequate compensation.
Loss of Enjoyment of Life: Many cases say it is not a separate claim from pain
and suffering. Modern trend is to allow this as a separate element of damages in
addition to whatever other pain and suffering is proven. Important: loss of
enjoyment of life is not a separate item of damages from pain and suffering; it is
one element for calculating pain and suffering for exam
PAIN AND SUFFERING
What is included in pain and suffering? (components)
(1) the victims anguish and terror felt in the face of impending injury and death
(2) the victims tangible physiological pain at the time of injury and during
recuperation

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(3) the victims enduring loss of enjoyment of life as one who is denied the pleasures
of normal personal and social activities because of his permanent physical
impairment
(4) the ALI report also classifies as pain and suffering what others call the derivative
damages category of consortium, the immediate emotional distress and longterm loss of love and companionship resulting from the injury or death of a close
family member
LOTH:
COA negligence (personal injury action)
Remedy: damages (general, P&S)
o Issue Is loss of enjoyment of life to be considered a factor in calculating
P&S or is itself a separate element of recovery? It is merely one factor that
can be taken into consideration in calculating pain and suffering. One of the
main reasons behind this is to prohibit double recovery.
Golden Rule Argument (inadmissible) if you had the plaintiffs injuries how much
would you like to be compensated?
Per Diem Argument McDOUGALD:
COA: negligence (personal injury action)
o Remedy: damages. -non-economic/non-pecuniary/general damages - Ps
awareness is relevant in calculating damages for loss of enjoyment of life
Plaintiff was in a persistent vegetative state. Experts differed as to whether
she was aware of her pain and suffering
- Non-pecuniary damages should be considered together.
o Cognitive awareness is a prerequisite to recovery for recovery for loss of
enjoyment of life (equally with pain and suffering - if you cant feel it, you cant
recover for it)
o Need some level of awareness to recover for pain and suffering if
you cannot feel pain then you cannot recover
o The majority says that loss of enjoyment of life is recoverable as an
element for pain and suffering
THE DIVERGENCE BETWEEN TORT AND CONTRACT IN LIMITING DAMAGES

Foreseeability limits contract damages; foreseeability is measured when K is

formed (Hadley v. Baxendale)
Proximate cause limits tort damages

EVRA:
COA: negligence; Remedy: damages
This case deals with consequential damages (special, indirect, etc.)
The rule of Hadley is that consequential damages will not be awarded unless the D was
pit on notice of the special circumstances. This case is not the majority rule bc Posner

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is trying to use foreseeability in a tort case (as opposed to proximate cause) to

limit/deny damages
Posner puts the burden on the party who is in the best position to limit liability (i.e.,
avoidable consequences) (like saying the P was contributory negligent)
o Contract liability is strict
Doctrine of Avoidable consequences: cannot recover damages for things he was in
the best position to know and to limit the loss; reasonable steps injured party can take to
lower/limit damages (e.g., that party can insure against the loss, can inform the other
party of the importance, etc.)
WHERE DO TORT DAMAGES END ECONOMIC LOSS RULE
STERN MAJORITY RULE
COA: negligence & strict liability; Remedy: damages; Here, Ps lost because the court
invoked the economic loss rule Ps were employed at a hotel that burned down. They
brought class action against those involved in the design and construction of the hotel to
recover lost salary and employment benefits for the period Ps were unemployed due to
the fire. Ct held that a defendant will not be liable for economic consequences of an
unintentional negligent act.
Economic Loss Rule: absent contract or injury to person or property, P may not
recover in negligence for economic loss. This is a policy argument; limits liability and
based upon the level of culpability (i.e., negligence is a low level of culpability)

Economic losses are recoverable in negligence and in intentional torts

JAIRE CORP MINORITY RULE

COA: Negligence -- interference with prospective economic advantage.
Remedy: damages (economic losses)
Here, clearly foreseeable that delay in construction would injure Ps business
RULE: Ps interest in prospective economic advantage may be protected against injury
occasioned by negligent as well as intentional conduct (minority rule)
Thus, economic losses may be recoverable in some situations where the harm is
foreseeable by a reasonable defendant
RARDIN - COA: tortious conduct in contractual setting; Case for lost profits. Court
didnt allow saying that the buyer, here, could have protected himself; that the machine
repair people did not have a duty to the buyer (there was no privity of K), and there was
no foreseeability.
BRIGHT- COA: negligence personal injury
Remedy: damages

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This case raises avoidable consequences doctrine

RULE: no recovery for damages that could have been avoided by using means which a
reasonably prudent person would have used to cure the injury
Doctrine of Avoidable Consequences: Duty that is imposed upon the injured party to
take reasonable steps to limit their injuries, i.e., a duty to mitigate.
o If successfully invoked then it decreases the amount of recovery
Eggshell Skull Doctrine take your plaintiff as you find him (doesnt apply to religion)
the scope is only to physical injuries Majority rule is to use the reasonable person
test (not the reasonable Jehovahs witness)
o The court may ask about the sincerity of your religious beliefs
Collateral Source Rule: (i.e., separate from the D) States if an injured party receives
some compensation for his injuries from a source wholly independent of the tortfeasor,
such payment should not be deducted from the damages which the plaintiff would
otherwise collect from the tortfeasor
o if successfully invoked then it increases the plaintiffs recovery
Collateral Source Rule (for exam):
Aids the plaintiff
If successfully invoked, it doesnt reduce Ds liability (and may result in double recovery)
(but, it is not really double recovery because the P must pay his attorney and be subject
to subrogation clause, where insurance gets reimbursed from what you collect in
damages)
Medical Malpractice Claims can be brought in 2 COAs
(1) Negligence
(2) Breach of Contract
PUNITIVE DAMAGES: These are damages above and beyond compensatory ones.
They are non-compensatory damages intended to deter or punish must
prove by clear and convincing evidence that D acted with express or implied
malice.
Contract Cases: Punitive damages are not awarded in breach of K cases, no matter
how willful the conduct, unless an independent tort is also present
Standards for punitive damages
Malice defined as ill-will (implied = outrageous)
Both express and implied constitute actual malice
TYPES OF MALICE
1.
Express: ill will

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2.

Implied: where deliberate conduct by D, although motivated by something other

than ill will, is so outrageous that malice toward a person injured as a result of the
conduct can be implied
Actual:

3.

o Punitive damages are taxable

o Punishment is for past acts
o Deter is for future acts
Can you insure against punitive damages? Majority rule is that you cannot
Arguments for/against punitive damages:
PRO: deter behavior, no double jeopardy,
CON: criminal law punishes, not tort law, double punishment, windfall to P, invites
abuse, no objective standard.
TUTTLE: P was seriously injured when Ds vehicle struck hers after running a red light
at an excessive rate of speed. The ct held that it will recognize punitive damages. The
doctrine survives b/c it continues to serve the useful purpose of expressing societys
disapproval of intolerable conduct. Mere negligence is not enough, must show wanton,
malicious, reckless, or grossly negligent conduct.
The court used two different standards of proof clear and convincing v.
preponderance. What level of culpability is sufficient to award punitive damages? This
court says that the plaintiff must show actual malice by clear and convincing evidence.
1.
2.
3.
4.
5.
6.
7.

Malice
Intent
Wanton/Willful
Reckless
Gross Negligence
Negligence
Strict Liability

BMW: fraud in the inducement. One of 3 torts for which you need to prove injury to
prove tort. This rules out nominal damages. BMW failed to disclose to consumer of new
car that it had been damaged and repainted before being sold. Ct held that punitive
damages may be properly imposed to further a states legitimate interest in punishing
unlawful conduct and deterring its repetition. SCT also held that only when an award is
grossly excessive is it arbitrary and in violation of the due process clause.

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FRAUD IN THE INDUCEMENT OF A CONTRACT requires

1.
Scienter means knowledge of falsity (knowledge that what you are saying is
false) (either non-disclosure (which can be active or passive) or affirmative
misstatement)
2.
Material misrepresentation of a material fact
3.
Reasonable reliance
4.
Injury (requires injury to prove the tort and therefore nominal damages are not
available)
What Standard does the Court set for determining when an award of damages
violates due process?
Factors to determine whether an award of damages violates due process
1. Reprehensibility of the injury
2. Ratio of 10 to 1 means punitive to compensatory (if punitive damages are less
than 10 times the compensatory it is a rebuttable presumption that the amount is
constitutional)
3. Compare the punitive damages to the comparable civil penalties
o What is the standard courts use to determine whether to overrule a jury award
for punitive damages? whether it shocks the conscience of the court
passion, prejudice, partiality
o Compare the civil penalties with the criminal penalties as a way to
determine whether they are excessive
What is the difference between tuttle and bmw? Tuttle is the common law limitations
on punitive damages and this BMW represents constitutional limitations on punitive
damages
MATHIAS
Recklessness/willfulness/wanton
Gross negligence
o Compare the compensatory damages to the punitive damages to
determine whether they are excessive if they are greater than 10 to 1
then they are considered presumptively violative of due process

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ATTORNEY FEES
NILSEN v. York Co.
American Rule: Each party bears its own attorney fees
Exceptions are:
1.
Statutory fee shifting left to courts discretion and supervision,
most commonly found in civil rights statutes
2.
Judicial doctrines common law ct decides attorneys fees
(typically the higher the fees, the lower %)
a. Bad faith litigation
b. Common fund doctrine left to courts discretion and
supervision. A reasonable fee based upon a percentage of the
fund bestowed upon the class.
1. Percentage of the Fund: (Majority Approach) -- reasonable
percentage standard (under statutes) reflects the amount of
attorney time reasonably expended on the litigation. Courts
have used between 19% - 45%.
2. Lodestar method: hours worked x reasonably hourly rate
and court adjusts that figure to reflect the contingent nature
of the litigation
3.
Contracts which stipulate for fees to non-breaching party

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TORT REFORM
BEST v. TAYLOR: Legislature wanted to limit non-economic damages (pain and
suffering/lost earning capacity, etc.). This is a form of Legislative remittitur and it
encroaches on the judiciary because it is a judicial duty to cap or reduce excessive
verdicts. that the court said the law is arbitrary is evidence that the court is using
rational basis analysis
INTRODUCTION TO EQUITABLE REMEDIES
As opposed to the legal remedy of damages, equitable remedies are:
1. Specific and direct orders to D to perform or to remedy the harm
2. Preventive
3. Discretionary
4. Flexible and fair because they are adapted to the particular case; and
5. Enforced by coercive measures directed against the person, rather than by judgment
agent the persons property
6. No jury when court issues equity
3 types of Injunctions
1. Temporary Restraining Order this one can be issued ex parte meaning that it
can be issued with only one part present in court
o in most states the TRO expires in 5 days
2. Preliminary Injunction (unless he says otherwise discuss the requirements for a
preliminary injunction)
a- Plaintiff must prove by preponderance of the evidence the likelihood of
success on the merits
b- A showing of irreparable harm meaning that the legal remedy of
damages is inadequate
c- The balancing of the hardships
d- Issuance of the injunction will not disturb the public interest
3. Permanent Injunction
Equitable Remedies (just a few)
1. Reformation
2. Injunction
3. Specific performance
4. Rescission
Tort Remedies: injunctions
Restitution/Unjust Enrichment: Constructive trust, equitable lien, subrogation
Contract Remedies: specific performance, rescission (quasi-contract), reformation

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Jurisdiction v. Equity Jurisdiction

- The propriety

Subject Matter Jurisdiction

- local action
Personal
rule
Jurisdiction
- The Power

inadequate legal remedy

An injunction issued by a court that lacked jurisdiction is void.

The Local Action Rule A court in state A lacks subject matter jurisdiction to determine
issues of title or trespass to real property located in another state (state B)
.
Equitable Jurisdiction: distinguished from power. Even if the court has equity power,
the court must have primary jurisdiction over the subject matter and the parties or res.
Furthermore, to grant equitable relief, the court must find that the legal remedies are
inadequate and generally, that the equitable remedy sought is the effective and
enforceable.
Equitable Jurisdiction
o no adequate remedy at law (if you can show irreparable harm then you have
proved that there is no adequate remedy at law)
o no jurisdiction to enjoin a criminal prosecution (see below)
o Most important use is to protect civil liberties
Conditions of Equitable Relief: There must be no adequate legal remedy and certain
other conditions must be satisfied.
Inadequate Remedy at Law: Some examples of cases where courts found an
inadequate remedy at law are when D threatened with multiple prosecutions
under a clearly unconstitutional statute, insolvency of the defendant, if the item is
unique, are ways of showing that there is no adequate remedy at law.
Tort Cases: Before an injunction, a court will balance the equities and consider
the feasibility of enforcement of the injunction.
INJUNCTIONS
In Rem = over the subject matter
In Personam = court has jurisdiction over the parties

Law acts in rem

Equity acts in personam
o If D does not do what equity requires, then it can be enforced by contempt

Important: Equity courts issue decrees v. Law courts issue judgments this is
important because the FFC only applies to judgments
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Local Action Rule: deals with real property and says a court in state A cannot award
damages with regard to a trespass or a title issue regarding land in state B (if a court
does, then its judgment is void) v. transitory
TABOR Decree prohibiting foreign lawsuits: Two cases in two different
states over the same subject matter. When may a court in one state enjoin
a foreign court proceeding? Rule: rarely and only if the foreign proceeding
will be likely to result in fraud or oppression. It is only where it clearly
appears that the prosecution of an action in a foreign state will result in a
fraud, gross wrong or oppression, that a court of equity will interfere
with the general right of a party to press his action in any jurisdiction in
which he may see fit and in as many of them as he chooses and restrain
him from the prosecution of such a suit.
Note the difference between Full faith and Credit and Comity
Full faith and Credit the law demands that state B enforce the action of State A
Comity state A will issue an injunction that has force and effect in state B. State B can
but does not have to enforce the injunction. It will enforce the injunction of State A if it
wants State A to enforce injunctions from state B.
MATARESE foreign real estate
The case involved land located in Italy. And the issue is whether the court
could enjoin and enforce a decree where land is located in another state?
When the subject matter of a suit in a court of equity is within another
state or country, but the parties within the jurisdiction of the court, the suit
may be maintained and remedies granted which may directly affect and
operate upon the person and not upon the subject matter, although the
subject matter is referred to in the decree, and the D is ordered to do or
refrain from certain acts toward it, and it is thus ultimately but indirectly
affected by the relief granted.
This case involved constructive trust as a remedy.
McNULTY foreign bank accounts
This case is about a courts contempt powers because the court ordered
the D to return funds to the U.S. and when D didnt (i.e., when he violated
the injunction), the court put him in prison. Injunctions are dependent
upon a courts power to enforce them. Injunctions cannot reach out to
another country, etc.
EQUITY LACKS JURISDICTION TO ENJOIN A CRIMINAL PROSECUTION
Prosecution under a valid statute is generally not enjoinable. Prosecutions under
unconstitutional or inapplicable statutes may be enjoined if irreparable injury may result.
NORCISA: As a general rule, criminal prosecutions are not to be enjoined
with the exception of restraining prosecutions under unconstitutional or
void statutes or local ordinances.

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GENERAL RULE Equity cannot quash a criminal case

A court will enter an injunction to enjoin a criminal proceeding when:
1.
A substantial right will be materially impaired (irreparable harm)
2.
Remedy at law is inadequate (unconstitutional or void statutes)
3.
Injunctive relief can be applied w/ practical success & w/o impossible
burden on the court
ACUNA equity lacks jurisdiction to enjoin a crime
Case is a pubic nuisance case brought by the city for an injunction.

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NUISANCE
Nuisance
/
\
Private
P = individual

Public
p = state or individual

Per se v. in fact remedies

Damages
Injunction
Nuisance substantial unreasonable intentional interference with the use and
enjoyment of Ps real property.
Private nuisances: doesnt have to affect everyone
Public Nuisances: does have to affect everyone; city has standing; Injurious to
health, offensive to the senses
Nuisance per se: imminent threat to health, safety welfare of the community; to
everyone easier to get an injunction if you can prove this if a nuisance per se, court
must issue the injunction
Nuisance in fact not always a nuisance and therefore there will be a balancing of
hardships

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RIGHT TO A JURY TRIAL :

Test under the 7th Amendment
1.
Look at the COA and the remedy (they can be either legal or equitable)
2.
If both legal, the have a right to jury
3.
If both equitable, then no right to jury trial
4.
If it is a case of mixed law and equity: refer to coa and look back in time to
when the amendment was adopted to see if an analogue existed. If not
RIGHT TO JURY TRIAL 7th amendment only applicable in Federal Court
however with respect to State Courts:
-Majority follows federal rule
-Minority-equitable cleanup doctrine
Feltner v. Wood: TEST ON RIGHT TO JURY TRIAL: Right to JT: first look at
statute, if no right stated go to 7th A: look at cause of action and the remedy, if
both are equitable then no JT, if both are legal then yes. When Ct does not
know, looks to common law analogues i.e., back in 1790 when the 7 th
amendment became law, was this COA equitable or legal.
TEST: Look at both the cause of action and the remedy if both are legal then that is
entitled to a jury trial
Note: Damages and injunction are only available together if damages compensate for
past harm, not future.
THREE TYPES OF INJUNCTIVE RELIEF
1. Temporary Restraining Order (TRO): to preserve the status quo. Short duration,
usually 10 days. Can be granted ex-parte, but not always. Need reasonable
attempt to give notice to D.
2. Preliminary Injunction: if granted can last from one month to a year.
Four Requirements for Preliminary Injunction
1)
A substantial likelihood of success on the merits;
2)
A substantial threat of irreparable harm; (legal remedy usually damages
- is inadequate)
3)
Balancing of the hardships (if the ct issues the injunction will it do the P
more good than it will harm the D (preponderance of the evidence);
4)
Injunction will not disserve public interest
*Standard: Preponderance of Evidence
3. Permanent Injunction:
Factors: (IPFBD)
1. Are the legal remedies Inadequate? Land, irreparable harm (cutting tree
down, u want shade; if repeats dont want to have to sue over and over again.

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2. Is there a property right involved? Old common law, not used today.
Injunctions are used to protect property rights.
3. Is the injunctive decree feasible? Look to see if negative injunction or
affirmative injunction; how much supervision is required. Negative more
feasible. Affirmative is harder because you must decide what D has to do and
requires supervision.
4. Balance the hardships in encroachments and nuisance cases
5. Any defenses (see below)
DEFENSES AGAINST INJUNCTION:
1. Laches has the Ps inaction allowed the D to act to his detriment. Laches is an
unreasonable delay in bringing an equity action, during which time the D has
changed his situation to the extent that an additional and unnecessary detriment
would result if suit were allowed. Even if there is a SOL, laches may bar suit before
the expiration. Laches does not bar a legal claim.
2. Unclean hands that the P must have acted honorably with respect to this
transaction. The unclean hands defense is usually confined to Ps inequitable
(unethical or immoral) conduct directly related to the subject of the litigation.
Unrelated inequitable conduct does not bar suit unless such conduct constituties a
public fraud. Unclean hands does not bar recovery at law, and application is
discretionary.
3. Freedom of speech for certain kinds of injunctions the 1st Amendment prohibits
prior restrain and prevents injunctions sometimes. Cant prevent printing a
defamation in newspaper, but can sue them afterwards.
4. Criminal act enquity will not enjoin a crime. Exceptions public and private
nuisance

Injunctions prevent future harm (damages are for past, present and future)
Typically, Injunctions are associated with torts; specific performance with K cases

TRO v. Preliminary Injunction what the difference? TRO is most immediate, decided
with very little evidence, early on, and temporary, can be ex-parte. Following the TRO,
must proceed for a preliminary injunction otherwise the TRO will dissolve.
PROMISSORY ESTOPPEL
1. Representation (promise)
2. Reasonable reliance
3. Injury will result unless one party is bound by their original representation
Promissory Estoppel: is a doctrine which if successful is a substitute for consideration
to make a promise binding
Equitable Cleanup (Substituted legal relief) (Ziebarth v. Kalenze)
Substituted Legal Relief = Equitable Cleanup Doctrine a court of equity, if it had
original jurisdiction when suit is filed, then it may also award a legal remedy (i.e.,
damages) in lieu of equity w/o a jury trial.

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Gist of minority position is that legal relief should be granted where equity jurisdiction
fails. But, In order for the doctrine to be applied in a particular case, however, P must
first establish his right to equitable relief, to which damages might then be incidental or
subsidiary.
o A court of equity that has J when suit is filed, may award damages in lieu of
equity w/o a jury trial
A legal remedy should be granted where equity fails.
o Minority opinion - It is a way of limiting or reducing the option of a JT.
o Majority - Trend is to enlarge the right to jury trial.
THE MODERN INJUNCTION: DISCRETION AND FLEXIBILITY
THE CHANCELLORS DISCRETION
Navajo Academy Equitable remedies are distinguished by their flexibility, their
unlimited variety, their adaptability to circumstances, and the natural rules which
govern their use. There is in fact no limit to their variety and application; the
court of equity has the power of devising its remedy and shaping it so as to fit the
changing circumstances of every case and the complex relations of the parties
COA: Forcible Entry & Detainer = Eviction (for renters i.e., landlord tenant
relationships)(statutory cause of action (like wrongful death & survival actions i.e., not
known at common law)
o Statutory
o constructive long-term lease
TEMPORARY V. PERMANENT HARM
PRELIMINARY INJUNCTION
When may a court order issue an injunction ordering a party to specifically perform a K?
Breach of K
Specific Performance
4 Requirements for when SP in a BoK is appropriate:
1. K is valid
2. P has substantially performed under the K and is willing
and able to perform its remaining obligations (mutuality
of remedies)
3. D is able to perform its obligations
4. P has no adequate remedy at law
LASTS UNTIL HEARING ON THE MERITS then dissolved or made permanent
Employment K cannot be SP 13th Amend.
o Cannot force someone to work for someone
o Same as slavery Indentured Servitude

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EQUITABLE DEFENSES -- TWO MAXIMS OF EQUITY: CLEAN HANDS AND

LACHES
CLEAN HANDS (Green v. Higgins)
The clean hands doctrine in substance provides that no person can obtain affirmative
relief in equity with respect to a transaction in which he has himself been guilty of
inequitable conduct.
To make out a claim for unclean hands, must show that the conduct was
1.
Willful conduct which is fraudulent, illegal, or unconscionable; and
2.
The objectionable misconduct must bear an immediate relation (as
opposed to a collateral matter)to the subject matter of the suit and in some
measure affect the equitable relations subsisting between the parties to
the litigation and arising out of the transaction
o Conduct which the court regards as inequitable.
o Not a binding rule, but is to be applied in the sound discretion of the court.
o Willful conduct which is fraudulent, illegal or unconscionable renders
hands unclean in court of equity.
o The misconduct must be RELATED misconduct rather than COLLATERAL
misconduct arising outside the specific transaction which is the subject
matter of the litigation.
o The doctrine has a shapeless, amorphous, and open ended quality which
leads courts to state the following principles of confinement:
o Misconduct cited as unclean hands must have been related to the dispute
plaintiff sues on or the relief the plaintiff seeks.
o Unclean hands is discretionary with the trial judge.
o Court on its own motion can assert unclean hands
o Public policy may override the unclean hands defense.
o D may raise unclean hands when P seeks an injunction, specific
performance, a constructive trust, or any other equitable remedy
substantive areas and types of claims where unclean hands comes up
include violation of a constitutional right, covenant not to compete, quiet
title, cancellation, partition, and copyright or trademark infringement.
o Unclean hands only bars equitable relief (not legal remedies)
LACHES (Stone v. Williams (Stone I))
Laches is an equity defense. To invoke it you need
a- Unreasonable delay
b- Prejudice to Defendant
o In contrast to SOL that provides a time bar within which suit must be instituted,

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o Test: Laches is an equitable defense which asks whether the plaintiff in asserting
her rights was guilty of unreasonable delay that prejudiced defendants.
o Unreasonable delay fact based analysis
o Prejudice - Decreased ability of defendants to vindicate themselves that results
from the death of witnesses or on account of fading memories or stale evidence.
Another type operates on the principle that it would be inequitable in light of
some change in Ds position to permit Ps claim to be enforced.
o More flexible than SOL and requires an assessment of the facts of each case. It
is the reasonableness of the delay rather than the number of years that elapse
which is the focus of inquiry.
o Where P has not slept on her rights, but has been prevented from asserting
them based, for example on justified ignorance of the facts constituting a coa,
personal disability, or bc of ongoing settlement negotiations, the delay is
reasonable and the equitable defense of laches will not bar an action
o FRAUD TRUMP LACHES i.e., if you were defrauded to not bring a claim
Various types of remedies, claims and issues trigger laches defenses:
1. Breach of trust
2. Constructive trust
3. Equitable lien
4. Tracing
5. Equitable redemption from mortgage foreclosure
6. Adverse possession
7. Action to quiet title
8. Reformation of a deed
9. A restrictive covenant
10. An option to repurchase real property
11. Specific Performance
12. Public employee contracts
13. Claims that a contract is illusory and void
14. Unconscionable or lacking mutuality

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ENFORCEMENT AND EFFECT OF EQUITABLE DECREES: CONTEMPT

Due process requires that equity decrees be sufficiently specific so as to adequately
inform the enjoined party of the requirements of the order.
How does a court of equity enforce its decrees? W/o injunction cannot hold a party in
contempt
CONTEMPT
CIVIL
Compensatory
Coercive
Fines (fines go to
Fines and/or jail
Plaintiff not to the
time (these
court or the state)
sanctions are
indeterminate in
length or amount)
- These are also
forward looking
- At some point if
the court is
convinced that
the defendant
will never
comply then it
turns into
criminal
contempt
- Proof must be
clear and
convincing
evidence that
the defendant
violated the
injunction

CRIMINAL
Fines and/or jail (they are fixed in
amount and duration)
proof is beyond a reasonable doubt

Civil Contempt It is the violation of a decree ordering D to take action (affirmative

decree) or prohibiting D from committing certain acts (negative decree) and
may result in civil contempt. Confining D until he complies with the terms of the
decree. You may not be imprisoned for nonpayment of debts.
1.
Compensatory/remedial (money damages for past acts of disobedience)
2.
Coercive -- $ or prison -- jail per day or fixed in time. D holds the keys to the jail
cell. Looks to the future; indeterminate period of time. May levy fine of specified
amount for past refusal conditioned on Ds continued failure to obey and/or fined
a certain amount for each day of non-compliance.

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Criminal A violation of a negative decree may also result in criminal contempt

designed to punish D for violating the court order vindicate the authority of the court.
Punishment for past acts. Absolute fine of specific amount paid to the US. If fine is
more than $500 or jail time more than 6 months, then entitled to jury trial. Punishment
for criminal contempt must comply with general requirements for criminal proceedings
(right to counsel, burden of proof, jury trial, 5 th amendment, cross-examination, etc.)
jail, fines; fixed past disobedience (Defenses that D can raise: court lacked subject
matter jurisdiction (voidable injunction must be obeyed and argued on appeal
Void and Erroneous orders: violation of erroneous but jurisdictionally valid orders may
result in criminal contempt. However, where an order is void due to lack of subject
matter jurisdiction, it cannot generally be enforced by civil or criminal contempt
(voidable is where the court lacked equitable jurisdiction)
Persons Bound: only parties and their privies with knowledge of the court decree are
bound. Nonparties acting independently are free to ignore the injunction
Civil into Criminal when does jail time pass from coercive to punitive? When you
know that D is not going to comply. The criminal contempt then kicks in and needs a
determinate term.
Standards for Contempt: criminal is cce; civil is pe
To hold a person in civil contempt need:
1. A clear and unambiguous order (valid court order)
2. Clear and convincing proof of non-compliance (knowledge of order)
3. Party hasnt reasonably attempted to comply in reasonable manner (non-compliance
with order)
Penalties for violating a contempt proceeding: Fine, jail term, or both
To tell what type of Civil contempt -- If fines go to P, then that is evidence that it is
compensatory, fines fixed in amount, no jail. If the fines go to state, that is evidence that
it is criminal.
Trend is to focus on remedy; just bc money is awarded doesnt mean that the remedy is
legal; err on side of a jury trial
Direct contempt: recalcitrant or unseemly conduct that occurs in the courtroom.
Indirect contempt: consists of defendants disobedience of injunctions outside the
courtroom.
Criminal contempt: to punish and deter. (past acts of disobedience)
1. Fines: determinate
2. Jail: determinate
3. Procedural protections

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Jury trial
Beyond reasonable doubt
Right to counsel

Civil Contempt
Compensatory: pay plaintiff for any loss caused by the violation.
Fines: determinate: go to plaintiff.
Coercive: to secure plaintiff the benefits awarded by the injunction.
Indeterminate: $1000 per day which can add up over time.
Fines
Jail - D holds the keys. (Indeterminate jail time)
Retrospective v. prospective:
o Retrospective contempt confesses failure. D breached the injunction
and the judge no longer can secure for plaintiff the conduct to which he
is entitled.
o Prospective (coercive) Devised by the judge to compel defendants
future conduct.
What Orders Support Contempt?
For the court to use its civil contempt powers, a defendant must disobey an operative
command capable of enforcement. Therefore, an injunction must describe in
reasonable detail and not by reference the acts sought to be restrained must
set forth in specific detail an unequivocal command.
For example, language of decree did not use language which turned a contractual duty
into an obligation to obey an operative command When it merely incorporated by
reference the settlement agreement, the order ignored the rule require that Due Process
limits the scope of an injunction (there are exceptions related to public nuisances (in
rem injunctions on the property i.e., drug houses, house of ill repute)
What is a Violation?: A contempt order is warranted only where the moving party
establishes by clear and convincing evidence that the alleged contemnor violated the
district courts edict
The purpose of holding a party in civil contempt is to enforce compliance with an order
of the court or to compensate for losses or damages.
1. Is there a clear and unambiguous court order
2. Is there a clear and convincing proof of non-compliance
3. Has D attempted to comply in a reasonably diligent manner
The Puzzle of Criminal Contempt: Coercive Contempt (UMW of America V. Bagwell)
For serious criminal contempt involving imprisonment of more than 6 months,
constitutional protections include the right to jury trial, proof beyond a reasonable doubt,
etc.

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Whether a contempt is civil or criminal turns on the character and purpose of the
sanction involved.
A fixed sentence of imprisonment is punitive and criminal if it is imposed
retrospectively for a completed act of disobedience.
A flat, unconditional fine is criminal if the contemnor has no subsequent opportunity
to reduce of avoid the fine through compliance
o Criminal contempt - is a crime in the ordinary sense and criminal penalties
may not be imposed on someone who has not been afforded the protections
that the Constitution requires of such criminal proceedings.
o Serious criminal contempt - involving imprisonment of more than 6 months
include protection of right to Jury Trial.
o Civil contempt sanctions - or those penalties designed to compel future
compliance with a court order, are considered to be coercive and avoidable
through obedience, and thus may be imposed in an ordinary civil proceeding
upon notice and an opportunity to be heard. Neither a jury trial nor proof
beyond a reasonable doubt is required.
o Paradigmatic coercive civil contempt: confining a contemnor until he
complies with an affirmative command. Can purge, carries the key.
o Criminal looks to the past/coercive civil deters future violations.
o If court is not sure what type of contempt it is, err on the side of criminal,
procedural protection. Odd, this gives a JT to an equitable issue.
o Distinguish compensatory civil from criminal - Who gets the money?
o If to plaintiff, civil,
o If to government, criminal.

Confinement, Contempt, and Cash Money: Ability to Comply (Moss v. Superior

Court, Ortiz Real Property)
o Willful failure to comply is no defense - There is no constitutional
impediment to imposition of contempt sanctions on a parent for violation of a
judicial child support order when the parents financial inability to comply with
the order is the result of the parents willful failure to seek and accept
available employment that is commensurate with his or her skills and ability.
o Its not involuntary servitude: A court order that a parent support a child,
compliance with which may require that the parent seek and accept
employment does not bind the parent to any particular employer or form of
employment or otherwise affect the freedom of the parent.
o Inability to comply with a child support order is an affirmative defense. The
alleged contemnor must prove inability to comply by PE.
The Collateral Bar Rule: an injunction issued by a court with jurisdiction must be
obeyed by the parties until it is reversed by orderly proceedings even though the order
may be unconstitutionally defective or invalid (i.e., obey then appeal). Exception:
where compliance would cause irreparable injury.

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Ex Parte Purvis
o Labor strike, an injunction is issued on request of employer to force
employees back to work, public employer, the injunction is violated (continued
to picket and violence).
o What is the collateral bar rule? - When the injunction was issued, and D
was not in agreement, could obey and modify or appeal. To raise the
unconstitutional argument in the contempt proceeding should have been
raised in the injunction proceeding that makes it collateral.
o Exception to the collateral bar rule - Can be raised when the injunction is
transparently unconstitutional void upon its face.
o Whats the 1st Amendment argument? - Speech v. conduct. This is more
about conduct, so the presumption is that it is not transparently
unconstitutional. The state has a legitimate concern in preventing public
disorder and violence and promoting the free passage of traffic.
Who Must Obey? (Ex Parte Davis)
Can a non-party to the original injunction proceeding act in active concert or
participation with [the original party that was enjoined], when the non-party
subsequently becomes the grantee to the original partys grantor? While a person
not named as a party is not ordinarily bound by the terms of injunction decree and
therefore cannot be punished for violating its terms, he is in active concert or
participation with the name party if he participated in the original proceeding and
was a real party in interest when the decree is rendered. This is so that
defendants may not nullify a decree by carrying out prohibited acts through aiders
and abettors, although they were not parties to the original proceeding.
Structural Injunctions: aimed at the government; the gov. is the D. A judicial mandate
that protects a persons constitutional rights. Usually aimed at controlling
institutions.
o Structural Injunction: injunction over a bureaucracy, to cure a constitutional
violation.
Injunction Reform (Taylor v. United States)
o Any prospective relief must be ended unless there are findings of continuing
violations of federal law.
o Issue: When can Congress change the law?
o Sources of law: constitutional, statutory, common law. Congress cannot
change constitutional law.

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CHAPTER IV: UNJUST ENRICHMENT RESTITUTION

The substantive basis of restitution is unjust enrichment. D must have a benefit
that it is unjust for him to retain. That means, it is always measured by Ds unjust
enrichment.
o There is no recovery for benefits voluntarily conferred upon another.
o The purpose of restitution is to return the status quo by compelling D to return
specific property or by awarding the injured party a sum of money equivalent
to the value of Ds benefit.
o Unjust Enrichment is the COAwhen cannot find a tort or K. Usually no
relationship bw the P and the D. and may be found even when both parties
are innocent.
Unjust Enrichment/Restitution

Legal
Substitutionary (always money)
- quasi k

quantum counts
- Quantum meruit
- Quantum valebat

Equitable
- constructive trust
- equitable lien
In specie
- subrogation
- replevin (personal)
- accounting for profit
- ejectment (real)

common counts
- money had and received (personal prop.) $$$$$ - money
- goods sold and delivered (personal prop.) prop not $$
- use and occupation (realty)

Unjust Enrichment Rule: One party should not be entitled to benefit at the expense of
another b/c of an innocent mistake or unintentional error. D must have received a
benefitwhich may be regarded by the D as neutral or even detrimental, and must be
unjust.
Volunteer/ Donor (Good Samaritan or Gift) - P loses b/c D's enrichment is not
considered unjust. Usually cannot recover if a volunteer/donor, but there are a few
circumstances where Ds enrichment is considered unjust. I.e., the burden may be on
the D to either deny or paysilence wont save him. Also, when the D clearly opposes
the action leading to the enrichment, but the P does it anyway. D does not voluntarily
accept a benefit which it would be inequitable for him to retain. Instead, P volunteered
(officious intermeddler) to do so and cannot collect.
Restitution at law Quasi-Contract: the legal remedy of restitution in money arose
from the common law action of assumpsit. The assumpsit action was a proper remedy

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for implied in fact K, as well as implied in law K that are not Ks at all (i.e., as no
promises or agreements) but rather instances of unjust enrichment, where the law
imposes an obligation.
Quantum Meruit (legal, substitutionary): As much as he deserves or as much as
services are worth. Two classic types of contracts to discuss quantum meruit are
employment contracts and service/contract out contracts.
Quantum Meruit is a bit ambiguous b/c it can be either an implied in law (fiction created
by the court) or implied in fact (real contract, determined by conduct of the parties)
contract. RE: if measured by Ps loss then implied in fact; if measured by Ds unjust
enrichment then implied in law.
How to Measure Damages:
1.
Reasonable FMVobjective measure of either/both P & Ds loss/benefit
2.
Reasonable value of benefit to D (implied in law).
Reasonable value of services rendered: P may recover for those
expenditures made in reliance on Ds representations and that the P otherwise would
not have made (even if D got no benefit). If D is wrongdoer, P should at least be placed
in as good as a position as he originally was in, even though D must pay more than he
benefited. Courts have often implied an obligation to pay based upon the theory that
performance at anothers request may itself constitute a benefit. (This is very similar to
measuring promissory estoppelmeasuring the Ds unjust enrichment by assessing the
Ps cost of reliance.)
Restitution in Equity:
a. Constructive trust: a constructive trust imposes a duty on D to transfer
property to P. It is imposed by law without regard to intentions of the parties
and unlike an express trust:
1. D has legal title to the property;
2. Retention would result in unjust enrichment; and
3. Remedy at law is inadequate
*P may benefit from a constructive trust in that it permits P to claim specific
property, giving P priority over other creditors of D.
*Effect of sale to bona fide purchaser: transfer of property to a BFP cuts off Ps
right to a constructive trust over the property, but does not cut off Ps rights to
proceeds arising from the transfer cuts off equity.
Constructive trust (equitable)- The original property is gone. When property is
acquired in such circumstances that the holder of the legal title may not in good
conscience retain the beneficial interest, equity converts him into a trustee and
the court orders the D to convey title. (If the still has the property, then apply
replevin. If the property increases in value, the is entitled to the proceeds.)
Highest priority in the law (higher then homestead)
Doesnt have to be misconduct by the .
If one party pays consideration and the other doesnt, the paying
party trumps
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o The bona fide purchaser of property would take free of the constructive trust,
but the gratuitous donee does not (even if totally innocent)
o Some courts are more lenient re tracing.
b. Equitable lien: an equitable lien is a charge on property to secure a debt or
other obligations, and gives the holder of the lien the right to sell the property
to satisfy the debt.
Requirement: an equitable lien may be imposed where there is an unjust
benefit traceable to property owned by D.
CompareConstructive trust: P often has the option of a constructive trust
or equitable lien remedy. However, where money is misappropriated to
improve land already owned by D, and equitable lien is the only available
remedy.
Lien enforcement: a lien is enforced by foreclosure and sale, but a lien is cut
off by prior sale to a BFP.
c. Subrogation: subrogation applies when one person non-officially discharges
an obligation for which another is primarily liable and which the latter out to
pay. Result: P is subrogated to the position of the creditor and is entitled to
any security interest or priority the creditor may have had.
d. Accounting for Profits: Equitable restitution is based on disgorgement of illgotten gains and thus may result in an accounting for profits that P in good
conscience should have received. It is measured by the defendants unjust
enrichment
Kistler v. Stoddard: The doctrine of UE is an equitable one, providing that one party
should not be allowed to benefit at the expense of another because of an
innocent mistake or unintentional error.
o Before being held liable for restitution, D must have received a benefit.
o Ds enrichment by itself will not trigger restitution. It must be unjust.
o Quasi Contract: Like damages, always $. But hard to tell the difference. Just
because its money doesnt mean its QC, because equitable remedies can be
$ also.
Kossian v. American National Insurance Company
Pro tanto: up to the contract price.
o Is QM limited by the K price? Not limited if Plaintiff is a non-breaching party
o Is Limited if Plaintiff is the breaching party. Quasi contract implied in law does
not suppose any intent between the parties but imposes an obligation upon a
party who has received a benefit. Look at Ds UE and determine what D
owes P.
Knaus v. Dennler
o An implied Contract is one which reason and justice dictate, and is founded
on the equitable doctrine of Unjust Enrichment.
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o Recovery under an Unjust Enrichment theory requires a showing that

the defendant has voluntarily accepted a benefit which it would be
inequitable for him to retain without payment since the law implies a
promise to pay compensation when value of services are knowingly
accepted.
o Voluntary acceptance only If a benefit is conferred in the face of
opposition and disinterest, it falls in the category of a gratuitously conferred
benefit for which quasi-contractual relief is not available. Important: has to
be a voluntary acceptance!
o A person who officiously confers a benefit upon another is not entitled to
restitution therefore.
o Volunteer/officious intermeddler: = loser.

What could the P have done here? An injunction because of an

impending nuisance; an easement by necessity;

Two Kinds of Implied Contracts: (must differentiate between these two on the exam)
1.
Implied-in-law (Quasi-K is a synonym) a fiction created by the court to prevent
unjust enrichment
2.
Implied-in-fact based upon conduct of parties
*Quantum Merit can be either an implied in law or implied in fact K
Measuring the Defendants Benefit: Services
Campbell v Tennessee Valley Authority: Is the measure of recovery to be
determined by the amount of money that would be necessary to acquire on the open
market the goods or services from which the benefit is derived, or is the measure of
recovery how much the benefit has been worth to the person upon whom it was
conferred? Normally arises in construction and person service cases. i.e.,
services performed (that is what quantum merit is)
o Implied in fact: damages are measured by using the K agreed upon for
recovery
o Implied in law: damages are measured by using either:
1. Reasonable/fair market value of services performed*
2. reasonable value of the benefit to D
3. upper limit amount agreed upon by the parties in the unenforceable K
(this is the one that is preferable)
Farash v. Sykes Datatronics, Inc)
o plaintiff may recover for those expenditures he made in reliance on Ds
representations that he otherwise would not have made (i.e., he may recover
his reliance interest) while this is odd, this is a way of measuring damages
for unjust enrichment
o The basic aim of restitution is to place the P in the same economic position as
he enjoyed prior to contracting
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o The P recovers the reasonable value of his performance whether or not the D
in any economic sense benefited from the performance (here, D had no
benefit that is why that is important)
o If what the P has done is part of the agreed exchange, it is deemed to be
received by the D
Earhart v. William Low Co. Can a party who expends funds and performs services
at the request of another, under the reasonable belief that the requesting party will
compensate him for such services, recover in QM although the expenditures and
services do not directly benefit property owned by the requesting party.
o Sometimes Ds UE can be measured by Ps reliance interest i.e., here they
used the promissory estoppel remedy.
o But its just another fiction, its a better argument to say that D should recover
under promissory estoppel.
What you must show for promissory estoppel:
1. Representation
2. Reasonable reliance on the representation
3. injury
Three interest in a K
1. Expectation
2. Reliance
3. Resitutionary interests
Damages expectation interests
Specific performance expectation interests
Recission consistent with restitution (put party in pre-K)
Reliance Interest In preparation to perform out of pocket expenses incurred by the
P not directly benefiting the other party

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EQUITABLE RESTITUTION
The Constructive Trust (Simonds v. Simonds)
When property has been acquired in such circumstances that the holder of the
legal title may not in good conscience retain the beneficial interest, equity
converts him into a trustee. A constructive trust arises when a person holding
title to property is subject to an equitable duty to convey it to another on the
ground that he would be unjustly enriched if her were permitted to retain it. (COA
unjust enrichment remedy: constructive trust.
o A fiction created by the court to prevent unjust enrichment and is measured
by Ds unjust enrichment.
o Important: A D must have obtained title over property which the P is seeking.
o also need tracing (i.e. trace the Ps property into the new property
o if D still has Ps property then remedy is adequate then dont need a
constructive trust if D has sold the Ps property to a third person, P cannot
get property back from a bonafide purchaser.
o Dont need a breach of a fiduciary duty; dont need wrongdoing of D (can be
imposed over an innocent party)
o Giving consideration trumps gratuitous donees (i.e., here there was a divorce
settlement requiring the H to maintain life insurance for the first wife; by failing
to do so and then having the 2d wife be the only named beneficiary, the 2d
wife is a gratuitous donee
o Cannot impose a constructive trust against a BFP
Tracing
Constructive Trust v. Equitable Lien
Constructive trust originated in trust law, i.e., breach of a fiduciary duty.
Three types of Ks/trusts:
1. Express Contract - Express trust
2. Implied in fact K - Resulting trust
3. Implied in law K - Constructive trust

No breach of fiduciary duty is required today to impose a constructive trust.

Equitable Lien is limited by amount taken from P and doesnt require that
the new property be acquired by the Ps property
If property appreciates in value, use constructive trust; if it depreciates use
equitable lien
Constructive Trust is one of the highest priorities under the law, even over
homestead exemption.
o Tracing: Requires P show that Ps property came into the hands of D and D
took the property and exchanged it for other property.
o Equitable lien: any time you can impose a constructive trust in the alternative
you can impose an equitable lien, but the reverse is not true.
o D embezzles 50 M buys blackacre with $ today blackacre worth $100,000.
Can P ask for ConstructiveTrust, Equitable Lien, and for how much? CT for
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$100,000, EL for $50,000 as long as you can trace the money into the new
property, no matter how much the property is worth, you get it.
o If the property appreciates, use a constructive trust. If it depreciates, use an
equitable lien.
o Possible exam Q: Rate the remedies: which is the best, 2d best, etc. Are
remedies cumulative or in the alternative?

Legal
Damages

Replevin

Remedies for Conversion

Equitable
quasi k

Constr. Trust

equitable lien

=forced sale -in specie

-waive tort -BFP cuts off equity
-fmv at time &
+detention damages & sue
place of conversion (for loss of use)
in assumpsit
-tracing (D has exchanged
+ pre-judgment
or sold property and no
(loss of use)
longer has it
interest
+ consequentials
+ possibly punitives

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Definition of Conversion: Intentional substantial unreasonable interference with the

property rights of another. (Nominal damages are possible/tort version of
threat/trespass is the smaller version of tort)
Essentially supports five remedies (these are all or that is you choose which
remedy:
1. Damages- forced sale (see above for measure of damages)
2. Quasi contract- either 1. Common courts or 2. Quantum meruit waiving
tort + sue in assumpsit
3. Replevin - + detention damages (getting the personal property back)
4. Constructive Trust D exchanged Ps property for new property
5. Equitable Lien
o The first three are used when the person still has the property.
o The last two are not available to BFPs because they have equitable title and
that cuts off the possibility of equitable remedies.
o Constructive trust is one of the highest priorities in the law and is most
secured (in terms of actually seeing your money) discuss this if have to
rank remedies
Damages: Generally measured at the value of the property at the time and place of the
conversion. However, the court may take into account subsequent fluctuations in the
value of the converted goods (i.e., measure value at time of judgment). When Stocks
are in a fact pattern, consider exception to general rule.
NOTE: If multiple Ds, once judgment is paid, title vests retroactively in defendant who
pays judgment. Therefore, forced sale (judgment for damage payments) by one
converter relieves the other defendants of tort liability.
Replevin: (Legal, in specie, restitutionary relief for COA of conversion) D takes Ps
property and so changes it that it no longer resembles the Ps original property. May
recover the specific personal property that has been wrongfully taken/detained and
detention damages (detention for loss of use)
- Replevin is not available when the original converter doesnt have the
property
- When you waive the tort and sue in assumpsit, you sue for the appreciation
and replevin to get the appreciated goods in specie.
- Must provide a person w/ notice and opportunity to be heard before (pre
seizure of the property) statutory replevin may be enacted.
Detention Damages: (loss of use)
1. Rental value often measured by this
2. Pro-rated portion of a lease
3. Lost revenue from not using
4. Overtime wages from not having the property
5. Cost of using a spare thing

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Ascession- Defense to replevin. If properly invoked, cuts off Ps right to replevin

property is so different in form that P not entitled to it anymore & value has appreciated.
(However, other remedies are still available) Only innocent converter can invoke
ascession.
Equitable replevin not much difference between equitable and legal replevin. Only
available where damages would be inadequate (unique)
Similar to injunction (no legal remedy and unique property)
No jury trial
Ejectment does to real property as replevin does to chattels.
Ejectment- (legal, in specie, restitutionary relief) does to real property what replevin
does chattels.
Ejectment + mesne profits v. Forcible Entry & Detainer (seeking re-possession;
claiming one is in lawful possession).
Repossession.
Conversion vs. Trespass
- Conversion = major interference
- Trespass = minor interference
Usually choose between trespass and conversion.
Dont have to show injury for conversion, unlike trespass to chattel
Only the legal remedies of conversion are available when the still has the property.
When the pays the judgment, the title vest retroactively and good title passes to the
subsequent purchaser.
Court may allow the property back and the money made.
When the property is changed too much, the BFP is still liable for the FMV of the
property when received, but doesn't have to give it back.
Equitable Lien- The maximum recoverable is the value when it was taken. Therefore,
if the property appreciates, use constructive trust, and use equitable lien when it
depreciates. Rarely do the courts make you prove the legal remedy is inadequate for
these two remedies. RE: constructive trust as a slight advantage bc a secured creditor.
Rental value- Can either be the 's loss (damages) or 's unjust enrichment (quasi k).
Has to be continuous use and occupation.

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_________
Chapter 5 PROPERTY INTERESTS
Choosing the Remedy
Baram v. Frugia
Payment by one converter (in a multiple D case) relieves the other Ds. Here, it was a
forced sale. Title vests retroactively to the date of the conversion therefore P can not
sue anymore Ds.
What if doc sued in quasi contract? Waive the court and sue in assumpsit. Could have
gotten more money use when Ds UE exceeds Ps loss.
Replevin:
CT: no because if D still has Ps original property, there can be no constructive trust.
Welch v. Kosaky
Conversion v Trespass to Chattels = Both are intentional torts
o Conversion is a major interference - Under conversion damages is usually in
the form of a forced sale. FMV at time and place of conversion, plus loss of
use.
o Trespass to chattels is minor interference (therefore, by definition, you get
the chattel back/conversion damages, you dont get the chattel back)
General rule for measuring trespass to chattels damages: diminution of value.
Two ways of measuring diminution of value:
1) value at time and place of conversion value still left upon return; and
2) ??
o When is it better to use quasi contract? Always money, measured by Ds
unjust enrichment; QC is better when Ds UE exceeds Ps loss. Not the case
here.
Trahan v. First National Bank of Ruston
Good faith is no defense to the tort of conversion.
Different ways/times to measure damages:
o Date of conversion
o Date of judgment
o Somewhere between the two highest value reached between the two
dates
o Highest value within a reasonable time after P discovers the conversion

Important: This case involved stock which fluctuates in value if you see stock in
an exam, then discuss that the measure of damages could vary as set forth above.
Always look at whether it was a willful or innocent converter if willful, there is
an argument for using the higher amount

CALCULATING DAMAGES
Measured by Ps loss rather than Ds unjust enrichment

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Ways to measure
Cost to repair
Rental value
Diminution of value
Lost business profits
General Damages: Diminished Value v. Cost to Repair
Courts usually think of general damages as damages measured by market value.
They usually require a reason to depart from value measure
o Diminished Value - A dominant general damages measure for property is
diminished value.
o Cost to Repair - An alternative
Hewlett v. Barge Bertie: Negligent Damage to personal property: Measured by:
1. Cost to repair less speculative than diminished value, limited by pre tort
fair market value. Reasonable cost of repairing plus allowance for
deprivation of use so long as the repair expenses do not exceed the ships
just value at the time of casualty.
2. Diminished value (diminution in value) subtract post-value from pre-tort
value
3. Rental value
4. Lost business profits
Important: How do you choose between diminution in value and cost to repair
Depends, however, generally, the party can choose as long as it doesnt exceed pre-tort
value (unless exception below applies) (the party in the best position to minimize loss
should be the one with the burden of minimizing it as a theory to argue in an exam). If
Defendant was willful in his conduct, that could be a factor in a court allowing a higher
level of damages. Cost to repair is more objective and therefore more reliable and could
be argued as a reason for using that measure; Or Give P the option to choose between
two as long as it is reasonable; use the higher whenever the Ds conduct is willful
Personal Reason exception (Orndorff v. Christiana Community Builders)
o Personal Reason exception: if a building such as homestead is used for a
purpose personal to the owner, the damages ordinarily include an amount for
repairs, even though this might be greater than the entire value of the
building. This is an exception on the ceiling on cost to repair i.e., that
you cant get cost to repair if it would exceed the pre-tort value.
o All that is required is some personal use by them and a bona fide desire to
repair or restore
o Personal exception justifies higher award of damages - Its important for
owners to have the property in the way that they want it. There are even
cases where Ds actions increase the value of Ps property. Courts say this is
irrelevant, even if it is economically wasteful to put the property back to its
original condition.
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When diminution in value and cost to repair yield nothing, can go for loss of
use/opportunity cost
Rental value can be a measure of damages or a measure of unjust enrichment

Lost Use (Kuwait Airways Corp. v. Ogden Allied Aviation Services)

Lost use is a measure of damages (cost to repair = general damages) This case is
about consequential damages, however, because the damages that were being
awarded were as a consequence of the Ds action but were not actually losses that
were suffered.
o Five ways to measure loss of use: Opportunity cost
1. Rental fee.
2. A portion of the lease, i.e., 6 days.
3. Lost profits minus expenses saved.
4. Increased expenses, wear and tear, overtime, etc.
5. Depreciation: depreciation over 6 days of a 60 year life airplane.
o Whether proof of actual pecuniary loss is required in order to recover for
loss of use of a damaged chattel, and whether the reasonable cost of
securing a replacement for the damaged chattel may be recovered even if
no substitute is actually rented.
o Opportunity cost lost opportunity i.e., you lose the potential for use -is the argument used by the court to allow the recovery of consequential
damages despite the fact that the airline, here, suffered no real monetary
loss.
Damages for Dumping (Don v. Trojan Construction Company)
Real Property cause of action Trespass to realty
The list of possible remedies for someone elses dumping on land includes:
damages, an injunction and restitution or a combination of them.
Apply cost to repair and dimunition of value
Rental value is objective measure that straddles the fence of clients loss or defendants
unjust enrichment. Measure of damages AND restitution
Rule: the detriment caused by the wrongful occupation of real property (except in
certain cases of willful holding over wherein the damages are higher) is deemed to be
the value of the use of the property for the time of such occupation (rental value). No
exception in cases where the P did not intend to use the land or to rent it out co that the
court can do no other than apply that measure, namely, the value of the use. That the
owners did not intend to make any use of the land themselves does not deprive them of
their proper award.

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Rental value is a way of measuring damages (and can also be a measure of quasicontract because it is an objective measure) (defendants savings can also be a
measure)

Trespass to realty is an intentional tort because where you are is voluntary even if you
didnt intend to be on someone elses property.
Remedies:
Legal
Equitable
Ejectment (restitutionary) & mesne profits
Quiet title
(if in possession)
(if not in possession)
Non-pecuniary Damages (Bond v. A.H. Belo Corp)
Sentimental value v. actual value of goods. - Goods with primary value in sentiment.
If the value the object has is primarily sentimental value, then can use this
measure: the reasonable special value of such articles to their owner taking into
consideration the feelings of the owner for such property. Actual worth or value of
the articles to the owner for use in the condition in which they were at the time they
were destroyed, excluding any fanciful or sentimental considerations. Such property is
not susceptible of supply and reproduction in kind.
Subjective v. objective standards
o Objective court states that it will use the reasonable value.
o Subjective special value to the owner of the goods
o Courts are reluctant to award damages for sentimental value too
speculative -- Fraud - Easy to fake
Here, the property was destroyed, therefore not repairable and cannot use
diminution in value
Limiting damages: Economic Loss (In Re Chicago Flood Litigation)
Economic loss rule - no recovery in negligence cases for economic loss absent privity
of contract, or damage to person or property.
o If defendants were held liable for every economic effect of their negligence, they
would face virtually uninsurable risks far out of proportion to their culpability, and
far greater than is necessary to encourage potential tort defendants to exercise
care in their endeavors.
o Moorman exceptions:
1. Where P sustained damage from a sudden or dangerous occurrence;
2. But for damages to be recoverable in tort, the sudden, dangerous, or
calamitous occurrence must still result in person injury or property damage.
3. Where Ps damages are proximately caused by Ds intentional, false
representation (FRAUD) i.e., can recover economic loss in fraud cases;
4. Where Ps damages are proximately cause by a negligent misrepresentation
by D in business of supplying info for guidance of others in their business
transactions.
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Economic Loss is Recoverable then in:

1. When there is a K that provides for it
2. Intentional torts like fraud
3. Injury to person or property
4. Where Ps damages are proximately caused by a negligent misrepresentation of a D
in the business of supplying information
Statutory Replevin (Fuentes v. Shevin)
FSA 78.01: Any person whose goods or chattels are wrongfully detained by any
other person may have a writ of replevin to recover them.
There is no requirement that the applicant make a convincing showing before the
seizure that the goods are, in fact, wrongfully detained. Rather, Florida law
automatically relies on the bare assertion of the party seeking the writ that he is
entitled to one and allows a court clerk to issue the writ summarily. File complaint
and a security bond. No pre-seizure hearing.
No Compliance with Due Process - Prejudgment Replevin provisions work a
deprivation of property without Due Process of law insofar as they deny the right to a
prior opportunity to be heard before chattels are taken from their possessor.
Replevin is an action to recover specific personal property that has been wrongfully
taken or detained, with an incidental right to damages caused by reason of such
detention.

o Detention damages is also a synonym for loss of use

o Self-help is unlawful in landlord tenant - Landlord must follow stats, does not
include changing the locks, its a summary proceeding (happens almost
immediately, limited in scope).
o Changing of locks => conversion of all her property in the apartment.
There can be no detention damages awarded where the D did not prevent the P
from coming and using the property
Measuring compensation for loss of use, i.e., detention, can be rental value

Equitable Replevin (Charles Simkin & Sons v. Massiah) VERY RARE

A court of equity may compel the delivery of a specific chattel wrongfully withheld. Only
recoverable where damages would be inadequate (i.e., items are unique and cannot
be replaced by purchase on the open market). In exam, we are talking about legal
replevin, not equitable.
Recovering And Protecting Real Property
Protecting Real Property (Kruvan v. 12-22 Woodlands Avenue Corp)
COA: trespass to realty. Remedy here was damages and was measured by rental
value.
Trespass to Realty: Physical intrusion, unauthorized, into the property of another.
Nominal damages are available.
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Use and Occupancy was also mentioned in this case which is a quasi-K remedy.
Think use and occupation for real property (as opposed to goods sold and delivered;
money had an received which are used for personalty). Use must be continuous
to use this remedy. Always associated with quasi-K and realty. Want to use this
remedy when Ds unjust enrichment exceeds Ps loss.
Prescriptive easement: functional equivalent of title after using something for so
long in an adverse possession sort of way; interest in real property.

Fenton v. Quabog Country Club

COA: nuisance and trespass to realty (invasion of golf balls) this is the golf case
where the balls were landing on their property and hitting the house and stuff.
Remedy: Injunction (stop the balls) and damages
Private Nuisance is a real property tort; use and enjoyment of the Ds property that
interferes with the use and enjoyment of Ps property neighbors in a fact pattern
raises this on an exam
Important Definition: Intentional and substantial and unreasonable interference with
the plaintiffs use and enjoyment of the property.
What remedies are associated with Trespass to Realty
1.
Damages compensation for replacing glass, loss in rental value of the property
while injury is occurring
2.
Injunction abate the nuisance is what the court would say
3.
Quasi-K
*Compensatory damages are available for past injury such as damage to property and
mental anguish due to nuisance. Injunction is available to stop continuing nuisance or
trespass. Damages are an inadequate remedy for a continuing trespass.
Trespass to Realty: measure of damages
1. Dim in value
2. Cost to repair
3. Rental value
4. Lost business profits (maybe)
*also associate injunctions with trespass to realty
Quasi-K can be measured by:
1. Market value of Ds unjust enrichment
2. Subjective measure of Ds benefit
3. Rental value
4. Reliance interest

In conversion, fair market value may not be an accurate measure where property
fluctuates rapidly in value (stocks)
Forced sale is a synonym for conversion
Replevin is in specie because you get the actual return of the property (always think
of replevin + detention damages).

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Doctrine of Accession: Whenever you think of replevin think of doctrine of

accession. D converts property and then changes property so substantially that it is
virtually a different property (i.e., D takes apart bike, takes it apart and uses the parts
to make an invention) invoked by D to cut off right to replevin and it is invoked by
Ds being an innocent converter.); generally the changing of form must be an
enhancement of value. (contrast, innocent purchaser that cuts of right to equitable
remedies)

Damages and Quasi-K are substitutionary

Replevin and Quasi-K are legal restitution
QUASI-K COMMON COUNTS
Money had and received (if the D had sold the Ps property, then use this common
count)
Goods sold and delivered (if D still has the Ps property, then use this common
count)
Use and occupation (real property)
MONETARY RECOVERY TRANSCENDING COMPENSATION
Willfulness (Grays Harbor County v. Bay City Lumber, Co)
COA: conversion (innocent); remedy: damages measured by:
1.
If original conversion was innocent, stumpage value (at time and place of
conversion) (stumpage value means trees being in place) doesnt matter if
subsequent converters were in bad faith
2.
If original conversion was willful, then by enhanced value (at time and place of
Ds conversion) this punitive measure of damages is available where a
trespass or conversion is willful or in bad faith.
Treble v. punitive damages: treble damages are those granted that give 3x general
damages (or you could say compensatory damages); punitives are to punish and deter.
Can recover treble even against an innocent purchaser which tells you that the point of
these damages is not to punish and deter, but instead are compensatory.
Restitution (Olwell v. Nye & Nissen Co)
Conversion of an egg washing machine. This case is an example of negative unjust
enrichment negative unjust enrichment is how much the D saved by his conversion
and another way to measure quasi-K. (this is similar to a replevin + detention
damages) amount D saved by his conduct.
MEASURING UNJUST ENRICHMENT
1. Lost rental value
2. Lost business profits an accounting for profits
3. Replevin: return object and sue for detention damages.
4. Ds actual benefit
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5. FMV of Ps services
6. Reliance
Constructive Trust - What is the clue to discussing constructive trust: when defendant
takes the plaintiffs property and sells it. Also clue for discussion money had and
received.
Schlosser v. Welk -- COA: conversion. Use unjust enrichment when you have neither
a tort nor a contract, then that is time to use unjust enrichment. Rightfully taken,
wrongfully detained was the basis for this court using unjust enrichment as the coa.
Common count was goods sold and delivered. What was the Ds unjust enrichment
where she never viewed/used the tapes?
Private Nuisance
-Per Se v. In Fact (Pig in the Parlor)
Conversion -- Constructive Trust
-Tracing against successive transferees
-Good Faith Improvements
-Restitution
-Ejectment + Mesne Profits
Trespass to Realty
-Accounting for Profits = equitable restitution
-Waiving the tort + suing in assumsit
When does it matter if the conversion was innocent of wilful
1. Stumpage value v. enhancement in value
2. Punitive/treble damages
3. Doctrine of accession
4. P can choose the measure if the conversion was willful
Mattson v. Commercial Credit Business Loans, Inc
COA: conversion; the remedy is:
Bona Fide Purchaser - If they purchased in good faith without knowledge that the
money they received was proceeds from stolen property, they would be like cuts
off tracing and cuts off the rights to a constructive trust
Tracing doctrine operates against innocent transferees who receive no legal title
and transferees who are not bona fide purchasers and receive legal but not
equitable title. If either type of transferee exchanges the acquired property for other
property, or receives income from the acquired property, tracing may apply.
Basically, follow the property (or money)
Should always consider tracing with equitable restitution of constructive trust,
equitable lien, and accounting for profits.
There is no theoretical limit on the number of transactions or changes in form
through which the claimant will be allowed to trace.
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James v. Bailey -- Plaintiff mistakenly improves someone elses land, D had no notice.
Except to the extent that the rule is changed by statute, a person who in the mistaken
belief that he or a third person on whose account he acts is the owner, has caused
improvements to be made upon the land of another, is not thereby entitled to restitution
from the owner for the value of such improvements.
Defendant must sue the Plaintiff to clear the title. Ejectment is remedy, plus
mesne profits. You made money off the improvement you made by mistake
to my land.
Betterment statutes: protect the investment of a person who improves land
which he later discovers is not his own.
Mesne profits: Owner of property improved because you have not only
improved the property, but also derived benefits from it.
o To the extent that the land has been increased in value whenever: 1 the
true owner obtains a judgment in an equitable proceeding 2 the true owner
commences an action of trespass or other action for mesne profits.
Tied to ejectment.
Mesne profits are attached to ejectment as detention damages are
attached to replevin.
Absent negligence, bad faith, or acquiescence by owner, cannot get relief
When you see that someone has mistakenly constructed improvements on
someone elses property -- Always likely to be talking about restitution
Note: Fraud in Inducement If lies are made in inducing another to enter into a
contract that is clue to discuss fraud in inducement of K and this is an intentional tort
(can then associate with punitive damages) punitive damages are rarely awarded in a
breach of K case. Breach of warranty (under UCC)
Edwards v. Lees Admr
Trespass to Realty unauthorized physical invasion of anothers land
trespass to realty was coa; remedy was
Unjust enrichment - Steps
1. Are damages an option?
2. What other remedy? Injunction?
3. Both can be recovered? Not double unless damages includes future
harm, permanent damages, they are past, present and future.
4. Alternative to damages or injunction: restitution: start with quasi contract:
K implied in law, waive tort and sue in assumpsit.
5. Real property: use and occupation. It requires, strictly speaking, that
use and occupation must be continuous, not intermittent, here it might be
seen as intermittent.
6. What about ejectment and mesne profits? Its legal, and its in specie
(want the same thing back), and its restitutionary.
Ejectment for real property v. replevin for personal property.
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Accounting for Profits: B/c Ds trespass was willful P argued that accounting for
profits should use the gross profits rather than net profits measure (this is a rental value
measure). However, bc D was only unjustly enriched to the extent of net profits, the
court uses that measure.

Innocent v. willful - Explain innocent trespass: presumably you intend to be

where you, whether willful or not.
Mesne profits: It is well settled that in an action to recover mesne profits, the
plaintiff must show in the best way he can what those profits are, and there are
two modes of doing so, to either of which he may resort he may either prove
the profits actually received, or the annual rental value of the land. The latter is
the mode usually adopted. Where there is occupation of a farm or land used
only for agricultural purposes, and the income and profits are of necessity the
produce of the soil, the owner may have an account of the proceeds of the crops
and other products sold or raised thereon, deducting the expense of cultivation.
Restitution: quasi contract: common counts: only use and occupation can be
applied to real property: only applies if continuous: but still apply quasi contract:
Once the minerals is severed, it becomes personal property. (conversion) No
longer use and occupation.
Quasi contract: Measured by defendants unjust enrichment - different
ways:
Rental value
Fair market value
Benefit conferred
Subject value in the hands of the D
Reliance interest
Assumpsit - An action ex contractu as distinguished from an action ex delicto.
Hence, in order to sustain the action, it is necessary for P to establish?

BALANCING THE HARDSHIPS

(Harrison v. Indiana Auto Shredders)
Public v. Private Nuisance - Could it be public nuisance? Greater the number
of people affected, more likely to be public. In a public nuisance P is typically the
government, although could be private.
What distinguishes a public from a private nuisance According to Sanchez,
a lot of people are effect in public (though this can also be in a private nuisance);
the government or city typically represents the public in a public nuisance case (a
private citizen can represent in a public nuisance case if he can show that his
injury is different in kind from the way the public is generally effected by it
otherwise, lack standing to bring a public nuisance. (Remember the gang case
where Gangs are a type of public nuisance. Legal remedy inadequate/criminal
prosecution in gang case was inadequate.)

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Private Nuisance an intentional tort, substantial unreasonable use and

enjoyment of ones property that interferes with the use and enjoyment of
another ones property. Think about damages and/or injunction and punitive
damages (bc it is an intentional tort) cce + actual malice for punitive damages.
Nuisance: intentional substantial unreasonable use by D of his or her property
which interferes with Ps use and enjoyment of his or her property.
o Per se: at all times and under all circumstances, plus threat of imminent
harm to neighbors. Imminent and dangerous harm (like an emergency)
Imminent threat to public health and safety, says Sanchez. Calling it
per se affects the analysis for an injunction i.e., you do not have to
balance the hardships and the court must issue the injunction upon a
finding of a nuisance per se.
o Effect on remedies: Easier to prove (cause of action); injunction:
process: is legal remedy adequate calling it per se probably gets over
this; threat of imminent harm, yes, balancing the hardships: nuisance per
se will impact this by saying there is no balancing of the hardships.
o Nuisance in fact: something in the wrong place, isnt always a nuisance
just where it is located makes it a nuisance. Nuisances primarily because
of the circumstances or the location and surrounding of the activities,
rather than the nature of the activities themselves. Very often this type
will present the offensive activities of an otherwise lawful business,
activities that are being conducted in such a manner so as to become a
nuisance. Pig in the parlor analogy it is a nuisance because of where it
is (i.e., a pig in a barnyard would not be a nuisance)
o Cannot have permanent injunction and permanent damages because it
would be double recovery b/c of the future harm element they are
correcting and compensating for.
o Proof of imminent harm is evidence that legal remedy is inadequate
(damages would be the legal remedy)
o Here, damages awarded in private nonpermanent nuisance as loss of use
(rental value) which yields zero in this case. This is not always the case,
i.e., rental value, there are more remedies available for private nuisance.
Remedies: Measured by:
o Diminution in value of property caused by the nuisance (pre tort v. post
tort)
o Lost business profits (not here)
o Punitives (think about it with an intentional tort-must show clear and
convincing evidence of actual malice).
Injunction: May just say abate the nuisance.
o Balance the hardships Environmental vs. Economics

(Boomer v. Atlantic Cement Co.) this is a private nuisance case

Where there is NO favorable environmental purpose, just balancing
economic interests.

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What measure of permanent damages: compensation for total economic loss to

property:
Suppose you are neighbor: you get settlement, then sell, can that party sue?
NO. Damages paid are past, present, and future.
Prevent double recovery - You need to separate the dust from other
inconveniences.
Emotional Distress - can be taken into account in calculating damages in a
nuisance case, which goes to use and enjoyment of property.
Inverse condemnation: not taking the property, but reducing its value.
Eminent domain: The Government uses your property for a public use and
compensate you for the fair market value of the property they took.

WAYS TO PROVE LEGAL REMEDY INADEQUATE

1. Irreparable harm
Multiplicity of lawsuits
Insolvency of defendant
(Goulding v. Cook)
Where damages wouldnt be a good remedy for Plaintiff because he
doesnt want money
Injunction
Ejectment plus mesne profits may work.
Easements of necessity can only be granted in very limited circumstances of
reasonable or absolute necessity. If a court were to deny an injunction against
trespass on the premise that some wider rule of easements of necessity obtains,
we would not hesitate to overturn that exercise of discretion.
Good Faith Improver = Someone who by mistakes makes improvements on
anothers property. In this case, the guy did it intentionally so this doctrine is not
applicable.
CERCLA: Clarity or Chaos (Boeing Company v. Aetna) violation of federal statute
(CERCLA) providing for response costs; this case centered around whether
insurance co. had to reimburse business for response costs based upon whether
they are considered damages or restitution.
Response Costs: cleanup of waste sites
Labels apply to cost of cleanup in the toxic waste area?
o Restitution or
o Damages. (They are mutually exclusive).
Ultimately court decides that damages included cost of cleanup so its covered by
the policies.
If calling restitution equitable and damages legal is not a strong argument to say
cost of cleanup is restitution, what is the best argument for calling cost of cleanup
restitution?

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Chapter 6 - SALES AGREEMENTS

o The remedies for torts are larger than breach of K

o The SOL is longer for contracts then torts.
Recession put parties in position they were in before K; unravels the contract
Specific perform & damages put parties in position as if K had been performed
Can get nominal damages for breach of K; no punitives, but can get prejudgment interest (so long as damages are liquidated)

Three major breach of K remedies: **If there is a breach of K question on the exam,
all three remedies should be discussed.
1. Rescission
Not an option unless breach is material
Can only get rescission from a fraud in the inducement of a
contract, which is a tort.
Goal of rescission: put parties in pre-contract position; relate
restitution: each must get back what they have put into the contract,
like getting back a down payment or returning the good.
Consequentials - In addition to rescission, you are also entitled to
consequentials, based on the RELIANCE interest: expenses paid in
preparation for the K which do not necessarily benefit the other
party
Limited by foreseeability, general rule at time K is entered into.
2. Specific performance
Equitable remedy
Goal of SP: put party in position would have been had K been
performed: plus consequentials such as delay damages, or may be
measured as lost profits.
Must prove legal remedy is inadequate
3. Damages
Legal (damages are money equiv. of spec. performance)
Always in form of money
Out of pocket (rare; restitution plus consequential) v. benefit of
bargain (majority; fmv plus contract price plus consequential)
Discuss damages first, and then Specific Performance because you must show legal
remedy is inadequate before getting equitable remedy.
Centex Homes v. Boag
Note: signing or performing of K specify in exam when saying the parties executed a
contract.
Elements of Specific Performance
Specific performance Process:
1. Is there an adequate legal remedy?

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Sub-issue: is it personal or real property? Why? Uniqueness is

a way or proving that a legal remedy is inadequate.
o Real Property - unique, so Specific Performance.
o Personal Property - still have to prove that damages is
inadequate.
The buyer wants real property. What does the seller want? The full
purchase price MONEY;
2. Mutuality of remedies?
Can both get the same remedy?
Old Rule - If NO - Then the rule is not satisfied, so under
Common Law since both cannot get same remedy, it is not
available to either one of them.
New Rule - Today its based on MUTUALITY OF OBLIGATION:
One party can get Specific Performance even if the other
cannot.
Must be Discussed The Old Rule Applies, New rule s a trend,
discuss both under specific performance.
Liquidated Damages - Can be seen as punishment if they are in excess of what the
actual loss is.
Rule of thumb for acceptable liquidated damages is about 10%.
Equitable Conversion - Once contract for Real Property is signed, title is split into legal
and equitable title. The buyer after the signing has equitable title to land and legal title
to money, the seller has the opposite; complete title does not transfer until the deal is
performed.
NOTE: The uniqueness prerequisite is taken less seriously in Specific
Performance for land than for goods.
At common law, sale of property was unique and could get specific performance (by
calling the property here quasi-realty, then specific performance was not
automatically grantable)
In K cases, always ask: Who is the breaching party? Who is the plaintiff? (at common
law, a breaching party cannot sue; now, the trend is it doesnt matter)
BUYERS DAMAGES FOR SELLERS BREACH
Tip: Fraud in inducement if the issue is around the making, i.e., the misrepresentation
takes place before the K is formed, talk about fraud in inducement; if the issue is around
a breach of an already existing K, then do breach of K analysis.
FRAUD IN THE INDUCEMENT -- Elements
1. Scienter knowledge of the falsity

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2. Material misrepresentation (goes to how big of a lie it

was) of a material fact (goes to how important that
fact was)
3. Reasonable reliance
4. Injury (No injury, no tort. But not actual malice, that
related to punitives)
Plaintiff has two options if Defrauded
Disaffirmance: Rescission + Restitution + Consequentials (based
on proximate cause) and Possibly punitives.
Affirmance: Keep K and get damages: sounds like SP plus
damages.
Two ways:
o Use same terms as breach of K, but the ways of
measuring are different:
Out of Pocket - difference between K price
and fmv; (minority)
Benefit Of the Bargain - difference between
fair market value and value if as represented
(majority)*cannot recover nominal damages bc
need injury
Remedies for fraud in the inducement:
o can disaffirm and get recission (Fraud in inducement is only tort for which
recission is a remedy) recission each must give back what they got in the
transaction
o Can affirm and get damages either:
1- out of pocket diff. Btw fmv & K price
2- benefit of the bargain (majority rule and will generally yield the higher
amount) diff btw fmv & value as represented
BREACH OF K -- Remedies
1- out of pocket return down payment
2- benefit of the bargain diff btw fmv & K price at the date of breach
(majority)
o What is the difference between specific performance and damages: one is
legal and the other is equitable
Expectancy Damages v. Recission-Restitution(Horton v. ORourke)
Measuring the cost of improvements:
o Cost
o Additional value
o Increase rental income possibilities

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Remedy: SP; its not an option because there is a lien on the property that cannot be
removed so, therefore, only damages are available:
Benefit Of The Bargain Used the minority approach -- when the breach was in
bad faith: I.E. they used out-of pocket because the breach was not in bad faith.
In the absence of bad faith the damages recoverable for breach by the vendor of
an executory K to convey title to real estate are the purchase money paid by
the purchaser together with interest and the expenses of investigating title.

Doctrine of good faith improver improve anothers land by mistake (usually

arises in boundary line issues, but could have mentioned it here and would get
credit on exam for it)

Measuring the Buyers Expectancy

Wilson v. Hays breach of oral K after part performance COA: breach of K; remedy is
damages. Because the goal is to put the party in the place he would have been in had
the K been performed, the court awarded a benefit of the bargain measure.
Texpar Energy v. Murphy Oil, USA, Inc. COA: breach of K; remedy; damages. The
measure of damages for non-delivery or repudiation by the seller is the difference
between the market price at the time when the buyer learned of the breach and the K
price.
Wolf v. Cohen breach of land sale K. three possible remedies are:
1. Specific performance
2. Damages
3. Rescission
Note: When you see a breach of K case, think of damages, rescission, specific
performance as remedies. Damages & Specific Performance put the parties in position
had the K been performed/expectation interest (rescission is to restore pre-K status/to
unravel the deal)
Doctrine of Economic Waste: applies only to instances of unavoidable harm that the
builder had reason to foresee and it applies to commercial buildings, not residential
dwellings. Moreover, here the builders breach was willful. Willfulness can expand and
effect a remedy. Limitations on damages in breach of K.
This is wrong. Fla. Supreme Ct applies equally to both commercial and
residential
Oloffson v. Coomer: anticipatory repudiation of a sales K. The non-breaching party
can Cover: to provide substitute source for goods. A form of mitigation of damages or
can wait performance for a commercially reasonable time.
Breach of Warranty

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General Damages: difference btw value of goods received and value as warranted
Consequential damages:
1) primary profits are the diff btw what the buyer would have earned
from reselling the goods in question had there been no breach and
what was earned after the breach occured
2) secondary profits any profits you would have made in addition to
the sale of the primary goods (i.e., buyers of mini mart goods not
coming in to buy because they no longer are buying their gas in a
certain place)
3) loss of good will profits this is damages recoverable if within the
contemplation of the parties when the K was entered into the contract
and only relates to future sales.
Reason to know test: which requires that if a seller knows of a buyers general or
particular requirements and needs, that seller is liable for the resulting consequential
damages whether or not that seller contemplated or agreed to such damages. This is
the issue of whether the damages were reasonably foreseeable at the time the
agreement was entered into.
Measure of damages for breach of warranty: the measure of damages for breach of
warranty (similar to fraud in inducement damages and generally, tort damages) is the
difference at the time and place of acceptance between the value of the goods
accepted and the value they would have had if that had been as warranted, unless
special circumstances show proximate damages of a different amount.
Reliance Recovery
Wartzman v. Hightower Productions, Ltd.: Breach of K case and negligence (most
malpractice cases are analyzed as negligence cases)
Reliance Interest: amounts expended in preparation and performance of a K ( a
synonym is out of pocket measure of damages that dont benefit the other party (as
opposed to restitution interest which is like a down payment). Thus, where the breach
has prevented an anticipated gain and made proof of loss difficult to ascertain, the
injured party has a right to damages based upon his reliance interest, including
expenditures made in preparation for performance, or in performance, less any loss that
the party in breach can prove with reasonable certainty the injured party would have
suffered had the K been performed.
Important: While ordinarily lost profits due to breach of K are recoverable, when loss
business profits are too speculative, that is your hint to think about reliance interest
recovery.
Sellers Remedies
Damages, Damages (Abrams v. Motter) the remedies available were specific
performance, damages or rescission (Note:to get rescission, have to prove a material
breach)

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Loss of Bargain Damages: The excess of the contract price over the value of the real
property to the seller at the date of breach.
o Despite the rule that damages are measured by comparing the cash value of
the contract to the cash fair market value at the time of the breach, if the land
increases in value before trial and the seller resells the property for more than
the contract price, the seller no longer has any loss of bargain damages.

Synonyms for Reliance interest out of pocket or consequential damages,

restitution

Mitigation - Courts have insisted that the seller mitigate damages by diligently and
promptly seeking to resell the property.
o If seller resells the property at a loss, the resale price is evidence of the
market value at the time of breach.
Pre-judgment interest - Compensates plaintiff for loss of use of money from date of
breach to date of judgment.
o More likely to recover pre-judgment interest in K case. In the case above,
however, it was disallowed because the amount owed was not known or
liquidated at the time of breach (because if damages are unfixed at the date
of breach they are unfixed at the time of suit so PJI cannot be calculated from
the date of the breach).
Consequential damages
1. Interest on net proceeds is associated with Specific Performance, i.e., only
recoverable when you seek specific performance.
2. Resale expenses occasioned by the breach:

Manufacturing cases: how damages are measured:

1. Difference btw the K price and market price at time of
the breach (which is a benefit of the bargain measure
of breach of K)
2. Difference btw cost of manufacturing and the K price
3. Or Nominal damages, only
Manufactured Goods - For a breach of contract for the sale of personal chattels, yet to
be manufactured, the vendor is entitled to recover the difference between the selling
price and the market value at the time and place of delivery. The court treats the mfr as
if retailer, no deduction for expenses saved.
Specific Performance argument: no unique product and damages are adequate.
Whenever Seller is manufacturer of product - Cost saved if the product is not
manufactured. Shouldnt this be subtracted from the recovery? Seller says no, I want
the lost product. Buyer says, but you never even manufactured this. It would be a
windfall.
RESALE OF GOODS BY SELLER -- McMillan v. Meuser Material and Equipment
Co. Breach of K; remedies damages this case adds the resale issue (below)
Options are open to the non breaching seller:
1. Rescission
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2. Specific Performance
3. Damages
RULE: Where the resale is made in good faith and in a commercially reasonable
manner the seller may recover the difference between the resale price and the contract
price together with any incidental damages allowed under the provisions of article 2-710
but less expenses saved in consequence of buyers breach. (the diff btw contract price
and the fmv at time of breach was used in this case because the seller did not resell in a
commercially reasonable manner)
Reasonable time depends upon the nature of the goods, the conditions of the
market and the other circumstances of the case.
Resale in general - This rule is based on the principle of avoidable
consequences. The defaulting buyer should be credited with the price actually
obtained or obtainable for these goods by a new sale.
o The seller is not accountable to the buyer for any profit made on resale.
Sprague v. Sumitoto Forestry Company, Ltd.
must give notice of intention to resell under the UCC to give the breach party
opportunity to remedy breach this is an element of the seller right to invoke resale
remedies
UCC distinguishes incidental damages from consequential damages:
know this difference for exam purposes
o Incidental damages are normally incurred when a buyer (or seller)
repudiates the K and wrongfully rejects the goods, causing the other to
incur such expenses as transporting, storing, or reselling the goods.
o Consequential damages do not arise within the scope of the immediate
buyer-seller transaction but rather stem from losses incurred by the nonbreaching party in its dealings, often with third parties, which were a
proximate result of the breach.
No Consequential Damages for Seller under the U.C.C.
Puzzle of the Sellers Profits(R.E. Davis Chemical Corporation v. Diasonics) here,
the breaching party is the plaintiff (at common law, couldnt do this)
Lost Volume Seller sold as much as it produced therefore lost a profit from the
original sale i.e., you can sell as much as you can make.
Breaching party is bringing the claim, asking for restitution of its down payment.
KP - RP yields 0, no damages, i.e., because the seller sold the goods.
If the seller would have made the sale represented by the resale whether or not
the breach occurred, damages measured by the difference between the K price
and market price cannot put the lost volume seller in as good a position as it
would have been in had the buyer performed
The resale would have been made whether the buyer breached or not, so I
should still be allowed to recover my lost profit.
Seller must convince court:
1. They are a Lost Volume Seller
2. They would have made the sale
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3. It would have been economically profitable to do so.

BREACH OF K REVIEW
Rescission requires a material breach, e.g., Construction contract 90% performed
is a material breach this constitutes substantial performance (rescission is not an
option for a buyer after substantial performance by the contractor)
Quantum Meruit is associated with rescission getting out of a K (limited by K
rate/price?)
Losing K where full performance exceeds the K price
Liquidated Damages Clauses(Nohe v. Roblyn Development Corp.)
Liquidated damages: is an amount fixing damages.
For a liquidated damage clause to be valid, it must be the following two requirements:
1) At the time the K is formed, it is virtually impossible to estimate the amount of
damages in the event of breach; and
2) the amount of actual damages bears a reasonable relationship to the amount in the
liquidated damages clause. It must be reasonable
o A term fixing unreasonably large liquidated damages is unenforceable on
grounds of public policy as a penalty. i.e., it vastly exceeds actual
damages.
o The law disfavors liquidated damage clauses. The law favors that the
breaching party pay exactly the amount of damages that the P suffered
o If the clause is struck from the K (as invalid), then the P must prove actual
damages.
o An estimate of damages which was reasonable when made may sometimes
turn out to be a gross exaggeration.
o When is validity (reasonableness) of a liquidated K measured? - When
Contract is signed, i.e., when the K was entered into. However, the modern
rule is toward assessing reasonableness either at the time of K formation or
at the time of the breach the modern trend, may even be the majority rule at
this point. Because an estimate of damages which was reasonable when
made may sometimes turn out to be a gross exaggeration. More recent
cases display a willingness to take this factor into account and to refuse
enforcement of the forfeiture if it would result in a large windfall to the vendor
in fact.
o Benefits to the seller that are attributable to a rising market subsequent to
breach rightfully accrue to the seller.
o A seller who has suffered no harm cannot retain a deposit even in the face
of a liquidated damages clause.
o Liq. Damages clauses tend to favor sellers of property
Sellers Restitution (Wellston Coal v. Franklin Paper Co.)seller sought rescission
and restitution in quantum meruit
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Buyer honors K while getting better part of the deal, then breaches when it goes
the other way.
Remedy is rescission.
When full performance of a K has been prevented by the wrongful act of the D,
the P has the right either to sue for damages, or he may disregard the K, and sue
as upon a quantum meruit for what he has performed
The real test in all cases of a Ps right to recover as upon a quantum meruit for
part performance of a K, wrongfully terminated by the D, depends upon the
consideration whether the D is thereby enriched at the loss and expense of the P.
Rescission is the best remedy in a breach of K when full performance exceeds
the K here, it was not a losing K.

Issue: Is QM limited by the K price when P is the non-breaching party? No. Thus, the
court here did not use the K price too limit QM.
U.S. v. Algeron Blair, Inc.
General contractor breaches after subcontractor partially performs (20 percent)
and Subcontractor would have lost money had it completed the K. If GC had not
breached, and SC fully performed, it would have been a losing contract
Remedy: Rescission -- restitution in the form of QM.
The impact of quantum meruit is to allow a promisee to recover the value of
services he gave to the D irrespective of whether he would have lost money on
the K and been unable to recover in a suit on the K. The measure of recovery
for QM is the reasonable value of the performance; and recovery is
undiminished by any loss which would have been incurred by complete
performance. While the K price may be evidence of reasonable value of the
services, it does not measure the value of the performance or limit recovery.
Rather, the standard for measuring the reasonable value of the services
rendered is the amount for which such services could have been purchased from
one in the Ps position at the time and place the services were rendered.
TRUST LAW
Express: can be written and oral
Implied: can be in fact (resulting trust) or in law (constructive trust) (also called Quasi-K)
A constructive trust can be imposed over money, real property and personal property
(just not people)
Because it arises by operation of law, rather than being dependent upon the
intention of the parties, Statute of frauds is not a defense to a constructive trust
(only to an express one or one implied in fact)
No longer need to establish a fiduciary relationship

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Specific Performance Revisted (Bander v. Grossman) breach of K to purchase a

rare sports car issue: specific performance of a K for the sale of unique goods
with a fluctuating price (similar to stock case, earlier) specific performance
may be decreed where the goods are unique or in other proper circumstances
P requested Monetary Specific Performance in the form of a judgment approximately
10 times greater than the breach of K damages awarded by the jury. The car was
sold prior to the commencement of the litigation for a price $185000 above the
$40000 K price, and P requested that he be granted SP in the form of a constructive
trust impressed upon the proceeds of the sale, plus interest from the date of the
sale.
Strictly speaking not SP case because hes not getting the car, hes getting money,
so its more like damages. .
MEASURE OF DAMAGES: If equitable money damages are to be awarded . . .
that award must be based upon value at the time of trial, rather than on an
earlier valuation.
Point is to put the claiming party in the same position he would have been in had the
K been performed.
It is specific performance because he has the money to buy that car today
(otherwise, this case doesnt really look like specific performance)

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Chapter 7 EMPLOYMENT AGREEMENTS (CONTRACTS)

Rescission, damages, specific performance (and damages are the primary

remedy) for breach of employment Ks
Cant force people to work against their will (13 th Amendment)
General CL rule employment agreements are AT WILL; therefore, either party can
terminate without legal liability.
Not every employment agreement creates a fiduciary duty or an agency relationship.
Negative injunctions (orders that say you cant work for some one else, e.g.) and
covenants not to compete: under SP because in a way its the only remedy besides
reinstatement that is close to SP.
Nominal damages is a possibility for breach of K.
Measure of damages: cost to replace, lost profits, liquidated damages, nominal, etc.
No cause needed to fire an at-will employee,
Cause is needed if there is a contract
Rescission in employment contexts employees must be paid periodically (by
statute) therefore there is not much to be gained i.e., rescission does virtually
nothing for either party rarely used
Specific Performance think automatically of the 13 th amendment which forbids
involuntary servitude; cant force someone to continue to work
Duty to mitigate damages: for an employer, to hire someone else

FOR EMPLOYMENT CONTRACTS, ASK Who is the breaching party employer or

employee? (remedies are different depending upon who breached) Rare for employer
to sue; more common for employee to sue employers who fire them.
Review: For Contracts, damages can be measured by
1.
Difference between K rate and fmv at time of breach
2.
Nominals
3.
Lost business profits
4.
Restitution
Employers Remedies
Employers Damages(Roth v. Speck)
What remedies are available to the non-breaching employer? Cost of obtaining
equivalent services in the marketplace
How are damages measured? The best way to measure this is by how much the
breaching employee is making elsewhere this sounds like restitution because it is
measured by the Ds unjust enrichment (this is similar to rental value in that the
measure being used??)

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Specific Performance - is not an option, court will not order employee to go back to
work (violates constitution 13th Amendment involuntary servitude Black Letter
Law).
Rescission - is an option, although not an attractive one. All you need is a material
breach, and this breach is material. Not attractive because employee was paid and
served competently, so there is nothing for employer to get out of it.
Damages - What is measure of damages in breach of employment K by employee?
o Cost to replace - What did it cost employer to replace breaching employee?
o Lost profits Can be too speculative.
o Restitution - Based on how much the defendant profited from his new job.
o Unjust Enrichment - The best measure of Ps loss is sometimes Ds unjust
enrichment

Employers Restitution(Snepp v. United States)

Promised not to divulge classified information and not to publish any information without
prepublication clearance. Published without prior approval. The employer is suing the
employee for breach of promise not to publish. Breach of K. The SCT upheld use of a
constructive trust (even though it appears that the legal remedy would have been
adequate here, i.e., punitive damages courts are not so strict with requiring a
showing of the inadequacy of legal remedies, unless it is an injunction or specific
performance here, they have maintain the strictness).
Remedies:
o Injunction as to future publications (prohibit future publications, but this
raises 1st amendment issues around prior restraint)
o Constructive trust on all profits employee earns from the publication no
longer need breach of fiduciary relationship to impose a constructive trust
o Nominal and punitive damages;
Employers Injunctive Relief(Beverly Glan Music, Inc. v. Warner Communications)
When an employee breaches K to take another job can they sue the new employer
for inducing the breach?
Plaintiff cannot enjoin prospective employers of the breaching employee from
working for them. This deprives the employee from his/her livelihood
Employer sought a negative injunction to keep Baker from working for Warner.
In California, by statute, courts cannot enjoin the breach of a personal service K
unless the service is unique in nature and the performer is guaranteed annual
compensation of at least $6K.
But, damages are still an option for the employer by suing in tort Warner for
interference with a contractual relationship
Employers Liquidated Damages(Vanderbilt University v. Dinaro)
Liquidated Damages clauses in employment agreements are generally disfavored.
But, a liquidated damages clause in an employment agreement will be held valid if
the amount stipulated is reasonable in relation to the amount of damages that

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could be expected to result from the breach, and that such damages would be
indeterminate or difficult to pin down (measured when breach occurred) same
as in a sales K. When do you measure reasonableness? Modern view is to
measure at either point
Another issue: when calculating employers injuries, could they take into account
consequentials? court says yes, even though some may seem to be speculative,
how much good will was lost, etc.
In the area of employment, lots of confusion about what form remedies take, are
they damages or restitution, they overlap a lot, also quasi contract comes into play.
There are only a few basics to focus on, know what each one does (damages Ps
loss, etc.), you cant go wrong.

Employees Remedies
Employees Remedies and Re-instatement(Dixie Glass v. Pollack)
Where an employer wrongfully breaches a contract of employment prior to the
time it has been completely performed, a cause of action for damages for breach
of contract immediately arises in favor of the employee and he is entitled, if he
elects, to recover his damages for the full term for which he was employed and he is
not limited to damages proven only to the date of trial where trial is before the
expiration of the term of employment.
POSSIBLE REMEDIES:
Damages in breach of employment K setting measure when employer
breaches: balance of contract wages less wages earned or should have
earned in replacement job.
Rescission: not a good option because it would entail restitution, giving back what
is given thus far, but this employee has already been paid for time worked, so not
much left for restitution although it is also restitution plus consequential
damages/reliance interest, did this employee sustain any damage on account of
employers breach. And
Specific Performance: 13th A will not permit it.
Duty to Mitigate: the duty is on the employee to use reasonable diligence to obtain
other employment and thus minimize his damage.
Consider facts like
o Age
o Probable life expectancy
o Education
o Experience
o Past earning capacity
o Probable span of employability.
Employees Avoidable Consequences

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Mitigation of Damages: subtract new job salary from old job salary.
Common Law Claims:
1- wrongful discharge in violation of public policy
2- breach of implied in-fact contract
3- Implied covenant of good faith and fair dealing
Rescission Based On:
1- Tort: fraud (consequentials are limited by Prox Cause)
2- Contract: failure of consideration (Conseq. limited by foreseeability)
3- Neither tort nor K: mistake, innocent misrepresentation (not entitled
to consequentials)
Quantum Meruit: can be implied in fact or implied in law sometimes limited by K rate,
sometimes not. It is limited when the P is the breaching party (otherwise you create
incentive for individuals in a losing K to get out of the K and sue).
Thus, QM is limited:
When non-breaching party is plaintiff
When non-breaching party is an attorney
Parker v. 20th Century Fox Employees avoidable consequences
COA: breach of K; remedy damages.
The General Rule is that the measure of recovery by a wrongfully discharged
employee:
Is the amount of salary agreed upon for the period of service, less the amount which the
employer affirmatively proves the employee has earned or with reasonable effort might
have earned from other employment.
Is there a duty to mitigate? No, the employees rejection of other available
employment of a different or inferior kind may not be resorted to in order to mitigate
damages. Thus, the employer must show that the other employment was comparable,
or substantially similar to that of which the employee has been deprived. Who has
burden of proof on damage mitigation? The employer.
For exam would also want to mention these other possible remedies:
Specific Performance: (Remember to go to damages first, because legal remedy
must be inadequate); is it a unique type contract?
Rescission: Generally speaking, no restitution, but maybe reliance, if she gave up
other films to do this one. Whats the test for whether this is recoverable? Was it
FORESEEABLE.
Damages: general damages.
Contract v. Tort Interlude: Exceptions to the At-Will Doctrine (Foley v. Interactive
Data Corporation)

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Note When suing for breach as an employee for being fired, essentially, the only
remedy is damages, reinstatement is not an option (reinstatement is like specific
performance)
1. Wrongful discharge in violation of public policy: is it tort or contract? Tort
What public policy is being argued: This is the banking business, so the public has an
interest in knowing if the bank has knowingly employed an embezzler. In this case, the
plaintiff lost on this claim because no public interest is implicated.
2. Implied in fact contract
An implied in fact contract is based upon conduct of the parties. Its a contract claim.
o Any implied in fact contract claim is based on the conduct of the parties,
based upon representations of job security and termination procedures, e.g.,
those contained in company handbook.
Employee Handbook - What are legal hurdles of using the employee
handbook as the basis of a lawsuit?
o Is it binding, what consideration did the employee give?
o When was it shown to the employee? If done at initial hiring,
there was more likelihood that the employee relied on it.
3. Implied covenant of good faith and fair dealing. Tort /contract
In insurance, analyzed as torts. Compare employment Ks to insurance Ks to see if this
should be a tort. Doesnt work. Insurance Ks can be distinguished. Interests of insurer
and insured are at odds. Employer and employee are in alignment. E & E have mutual
interest in performance on the job. If analyzed as a K, then it limits employers liability
because there is no possibility for punitives. This case said it was a This coa is a
contract when raised in the employment setting and analyzed as a K, not a tort.
Further, this claim is not barred by the SOF.
Talk about these three common law claims when an at-will employee
has been fired: wrongful discharge in violation of public policy, breach of
implied in fact K, and implied covenant of good faith and fair dealing
Employees Restitution
Chambliss Bahner & Crawford v. Luther
Client has the power and the right at any time to discharge his attorney with our
without cause. Such a discharge does not constitute a breach of K for the reason
that it is a basic term of the contract, implied by law into it by reason
QM is equivalent of rescission??
Rule of Thumb: when the K is not a profitable one (i.e., the attorney has billed more
hours than the K would allow), it is better to essentially rescind the K and sue in
quantum meruit (since billable hours x hourly rate exceeds the K amount). Public
policy, however, carves out an exception in the case of a client firing her attorney:
QM is limited to the K amount any other rule creates incentives for attorneys to
get themselves fired after they have billed more hours than the K allows.

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Runyan v. Pacific Air Industries first case where rescission is the remedy
Rescissions aim is to put the parties in pre-K position and always associate restitution
with rescission (giving back what each party has taken so far). P was also
asking for consequential damages.
IMPORTANT RULE: How are consequentials measured when P seeks rescission
based in turn on
1. Fraud (limited by proximate cause)
2. Breach of K (limited by foreseeability)
3. Mistake /innocent misrepresentation (no consequentials)
The logic behind this is because fraud has a high level of culpability; breach of K is midlevel; mistake is low-level of culpability

Specific Performance: unlikely in a personal services contract. But this is not

clearly one, this is franchisee/franchisor so not technically employment. Would need
to ask these questions: would a lot of court supervision be required?
The only tort for which rescission is an option is fraud. Court says this is not a
fraud case because the employer had good faith to carry through on its
contractual obligations, but could not do so.
Distinguish fraud from breach of K- If you lie before entering K, its probably
fraud; if you intend everything you say up to the time of the K, its just a breach.
Legal v. equitable rescission: The word rescission used alone on exam means
equitable rescission; we are not dealing with legal rescission.

Lynn v. Seby -- Here breaching party was the P. The only remedy a breaching party
can get is restitution. RULE: Though at common law, a breaching party
could not sue for any relief, the emerging trend is that a breaching party is
entitled to recover restitution which is measured as the excess to benefit
conferred over injuries sustained.
Employees Remedies: Recap (Freund v. Washington Square Press)
General formula for measuring breach of contract damages.
Benefit of the bargain: KP - FMV at the time of the breach:
NOTE: When damages fail for uncertainty, the remedy will be nominal damages.

Void, voidable, unenforceable K and the impact of these on rescission - restitution.

Election of remedies
Means you cant get more than one remedy;
o But: Damages and injunction (past / future). But if damages are
PERMANENT , its past present and future and no injunction in that case.
o Fraud -, victim has choice:
Stick with K and sue for damages, or
Disaffirm and seek rescission and everything that goes with it.
o When can an election of R take place? Cant happen before K is entered
into; there must be a signed K and then something goes wrong. Once victim

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discovers fraud, how long until the election of remedies (affirmance /

disaffirmance) is made; can it happen before suit? Yes, it can be manifest by
conduct, does not have to be by words, written or oral. Ex. Proceed with
transaction versus get out of transaction, but this is after discovery of the
fraud.
o Is there always election of remedies? No
o Can pleading in alternative serve as election of remedies?
o ProbaIbly not, even if one count says damages another SP and a third
rescission. Not generally bound by the election in the first count.
Latest possible time for election of remedies: submission to the jury. No rule
about when in time election should take place.
(Gannett v. Register Publishing)
Fraudulent Inducement - One fraudulently induced into a contract may, as a
matter of substantive law, either affirm or disaffirm the agreement.
o An election of the substantive right to affirm extinguishes the
substantive right to disaffirm.
o And so an attempt to invoke the remedy of rescission after an action on the
contract may fail, not because of election of inconsistent remedies, but
because the plaintiff no longer has the substantive right to disaffirm.
o Exercise of acts of ownership over the subject matter of the K will validate the
transaction and terminate the power of avoidance, regardless of whether the
other party has suffered any prejudice.
o The duty of care of a defrauded party who continues to operate a business for
the benefit of the other party after sending a timely rescission notice and
tendering the property back is that of a gratuitous bailee.
Measuring fraud damages:
o Out of pocket: difference between FMV and KP
o Benefit of the bargain: Difference between FMV and value property would
have had had it been as represented.
o Possibly punitives
o Possibly consequentials - limited by proximate cause.

Earl v. Saks & Co.

Fraud:
o Material misrepresentation of a material fact
o Scienter
o Inducement
o Reasonable reliance
o Injury.
Issue: does injury for fraud have to be pecuniary? Not necessarily.
Harper v. Adametz
A real estate agent failed to disclose an offer from a purchaser for an 83 acre farm.
Broker takes buyer to show him the land. Buyer made $7000 offer for the 83 acres;
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broker said seller did not accept but in fact broker never made the offer; second lie
broker told buyer he could buy 17 acre parcel for $6,000.
Reed v. King
Fraud in the inducement and not breach of K after signing
o Misrepresentations took place before the K was signed. Difference is
important because it affects remedies; options to victim of fraud, rescind or
affirm.
o In fraud you must choose between rescission and damages.
Generally speaking, if a K has been fully performed, cant use any of these things in the
box to get out of it
But, these are all defenses to contract performance (specific performance)
Duress

Undue Influence

Mistake or Unconscionability

--not torts (low level of wrongdoing)

--all can be used as a reason to get out of a K (i.e., defenses to specific
performance)
Defenses to specific performance
-statute of frauds
-minor status
Unconscionability (serves as a defense to specific performance)
Three types: (need 2 of these 3 to prevail)
1. procedural- (sharp tactics used to procure the k) looks at the kind of tactics applied
to induce you to enter into K (e.g., duress, undue influence, etc.)
2. substantive (most common) (unfair terms in the K itself) looks at the terms of the K
are they so extreme one sided e.g. car on an installment plan where the interest rate
is so high it is illegal
3. remedial ways in which the other party to K tries to enforce the K, e.g., the creditor
calls your employer after you are behind on payments or trigger garnishment
proceedings.
General rule is need at least two of the three types of unconscionability to assert it. It is
not a tort, but a defense to specific performance; full performance makes this argument
unavailable.
- not recission b/c he already sold the property cant get out of it
Three options open to court:
1. void the entire K
2. excise unconscionable part (enforce the remainder without unconscionable
term)
3. rewrite the K (limit the application of the unconscionable term to avoid
unconscionable results)

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*rewriting does not reflect the intent of the parties, only to make the K fair. As opposed
to reformation which is a rewriting in accord with intent of parties.
(SoF) K has to be in writing when:
Real property
K not performed w/in a yr
Sale of goods worth more than $500
DURESS
Odirizzi v. Bloomfield School District case where teacher resigns after being charged
with homosexual activity. He tries to rescind his resignation on the basis of duress,
undue influence, mistake and fraud
Cases in undue influence occur where there is a K, one party doesnt perform, non
breaching party sues, breaching party uses it as a defense (along with fraud,
mistake, innocent misrepresentation).
Duress must be an illegal action or threat in duress or menace, consists in
unlawful confinement of anothers person, or relatives or property, which causes him
to consent to a transaction. A threat to take legal action is not unlawful unless the
party making the threat knows of the falsity of his claim.
Mistake The parties must be laboring under a misapprehension of law or fact (Both
parties must have all material facts for a party to claim no mistake).
Undue influence: see below -- Here, used undue influence as a defense to
specific performance
Fraud see elements above
o Constructive fraud: Constructive fraud arises on a breach of duty by one in a
confidential or fiduciary relationship to another which induces justifiable
reliance by the latter to his prejudice. Here, need the fiduciary relationship.

Undue influence - pushing someones buttons when under stress.

Disparity in power
Taking unfair advantage of someones weakness of mind
Not a tort, therefore cant get damages

UNDUE INFLUENCE
1- Lessened capacity of the object to make a free contract
2- Application of excessive strength by a dominant subject against a
servient object
3- Over persuasion (which is generally accompanied by certain
characteristics including:
o Discussion of transaction at inappropriate time
o Consummation in an unusual place
o Insistent demand to finish at once
o Extreme emphasis on untoward consequences of delay

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o Use of multiple persuaders by dominant side against a

single party.
o Absence of third party advisers to the servient party
o Statements that there is not time to consult an attorney.
1.
*making of will is a typical, classic example of undue influence (elderly person
and someone close to the elderly person who has that confidential relationship
with them, and prevails upon them to change their will)
DURESS BUSINESS COMPULSION
Selmer Co. v. Blakleslee Midwest -- Selmer was subK for Blakeslee.
Raising a defense to the performance of the settlement agreement; the defense is
economic duress
o The mere stress of business conditions will not constitute duress where the D
was not responsible for the conditions
o Economic problems of P must be caused by the Defendant
Chapter 8 cases are all attempts to enter into contracts, and then one party does not
follow through. Then breaching party raises an affirmative defense or an excuse.
UNCONSCIONABILITY (p. 681) this is an equitable doctrine
Substantive: terms unconscionable, paying too much for an item, usually not enough
by itself to unravel a contract because K law says inadequacy of consideration is not
alone a basis for rescission.
Procedural: kinds of tactics employed to induce you to buy, some forms of undue
influence, pressure exerted on buyer to enter into K. (But fraud is a bigger wrongdoing,
so if fraud forget unconscionability
Remedial: how seller goes about collecting.
o Also, if K is fully performed generally unconscionability is no defense: logical
because if the K is completed it is hard to argue that it is an undue burden to
perform.
o The more the K is performed, the harder it is to get rescission.
Vockner v. Erickson
Theoretically it is possible for a K to be oppressive taken as a whole, even
though there is no weakness in the bargaining process and no single term which
is in itself unconscionable.
Unconscionable contract involves other factors as well as an overall imbalance.

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Unconscionable Contract: The principle is one of the prevention of

oppression and unfair surprise and not of disturbance of allocation of
risks because of superior bargaining power.
Factors:
o Unrepresented party,
o One party has more experience
o Inequality of knowledge
Reformation of Unconscionable Contracts- The unconscionable contract may
be reformed to limit the unconscionable clause and then enforced as reformed.

o UCC:
o Reject part
o Reject all, or
o Limit the unconscionable clause. Kill
So how to discuss this on exam:
o Cause of action for breach, one party raises unconscionability as a
defense, the other party tries to use laches to overcome the defense.
Substantive Unconcionability : bad terms, the payment was too low.
Procedural Unconscionability: undue influence, unequal bargaining power.
Reformation: radical, court substitutes its sense of justice for the intent of the
parties.
CONTRACT NOT FORMED -- Required Writing Missing (Schweiter v. Halsey)
Rule: Vendee under an agreement for the sale and purchase of property which does
not satisfy the statute of frauds cannot recover payments made upon the purchase price
if the vendor has not repudiated the contract but is ready, willing, and able to perform in
accordance therewith, even though the K is not enforceable against the vendee either at
law or in equity. (No legal description of the property which is a key term).
o This is another case where the breaching party is the plaintiff (at common law,
the only remedy a breaching party could seek was restitution)
o Thus, in accord with the great weight of authority has consistently denied
recovery of earnest money paid under a void or unenforceable agreement to
convey real estate where the buyer has defaulted and the seller was at all
times ready, able and willing to consummate the transaction.
o Court held that to the degree the K has been performed, it is
enforceable
o Unenforceable the buyer does not get security deposit back
o Void if K is void, you have no legal basis to keep the security deposit
o voidable
Lack of Capacity to Contract (Halbman v. Lemke)

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Contract with minor for vehicle. It threw a rod, taken to be repaired and left there,
repairs made, mechanic then unrepaired it and took to minors home, tried to get seller
to pick it up, the car was vandalized, now worthless. It is settled law in this state that a K
of a minor for items which are not necessities is void or voidable at the minors option.
As a general rule a minor who dissafirms a contract is entitled to recover all
consideration he has conferred incident to the transaction. In return the minor is
expected to restore as much of the consideration as, at the time of disaffirmance,
remains in the minors possession. The minors right to disaffirm is not contingent upon
the return of the property, however, as disaffirmance is permitted even where such
return cannot be made. Where there is misrepresentation by a minor or willful
destruction of property, the vendor may be able to recover damages in tort, but
absent these factors, as in the present case, we believe that to require a disaffirming
minor to make restitution for diminished value is, in effect, to bind the minor to a part of
the obligation which by law he is privileged to avoid.
Voidable by minor if returns as much consideration as he can
If depreciated, is the minor liable for depreciation
- Yes, even in case of depreciation, and adult must give back purchase price
Exceptions to minor rule
1) lies about age
2) necessaries (minor liable for FMV, not KP)
- CLOTHES, FOOD
3) Intentional Tort (find a tort, no need for breach)
If for necessaries: you can give back what you got, but liable for FMV of property.
Disaffirmance rather than rescission? Because only has to give back what he has in
his possession, even if vastly depreciated.
Unless: misrepresentation of age, fraud: separate tort.
damaged the property: separate tort.

If minor had intentionally

GROUND FOR RESTITUTION -- DEFICIENT CONSIDERATION

(Johnson v. GMC Chevrolet)
Bad pickup. Problems from day one.
Cause of
action: breach of contract. Revocation of acceptance: another was of saying rescission.
Under UCC 2-608: revocation must occur within a reasonable time when buyer
discovers grounds for it. Your conduct can show affirmance, then can no longer
rescind. This didnt happen in this case because the conduct of keeping the truck was
necessary.
o The truck buyers owed a duty of reasonable care for the truck (as bailees)
o Here, the court allowed for rescission of the K and reduced recovery by
reasonable value of the use of the truck. Measure can be either
depreciation or usage. Depreciation would yield a larger amount to the truck
dealer and mileage/usage lower. The degree of culpability of the parties

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would argue for a larger or lower measure when innocent, then the lower
value (as in this case usage).
MISTAKE
Rescission based upon mistake. Must be a mutual mistake of fact and failure of
consideration. A state of mind not in accord with the facts. More likely get relief if
mistake of fact rather than a mistake of law. Cannot get consequential damages
because mistake implies freedom from fault two innocent parties.
Generally, no relief for mistake of law (exception would be the law of another
state) i.e., cannot be mistaken when you have evidence that there was a
possibility of fraud (truck case for insurance money)
Types of Mistake:
1- Quality or value mistake rescission is not permissible
2- Mistake that goes to the essence of a K bigger than material mistake
rescission is possible.
*Consider risk of loss has one party assumed the risk of loss as is clause
suggests one party has.
As is cause the buyer agree to accept land as is. Accept it as is
- cant disclaim fraud
- if you can prove fraud, get out
- covers mistake b/c low level
Mistake in integration: writing does not reflect a meeting of the minds so the writing
must be changed. Need a meeting of the minds in order to get reformation changing
the terms to meet the intent of the parties.
If there is a mutual mistake (both parties)
Basic mistake goes to essence of bargain
-supports rescission
Reformation mistake in integration
- Mistake in Integration parties think they are entering a deed, and want rt of
survivorship, but think tenancy in common will give it. Writing says T in
Common. Mtg of Minds, jt. Tenancy
- If writing doesnt accurately reflect Mtg. Of minds, reformation will
change to make it correct
- Must show mtg. Of minds
- Doesnt work if minds are conflicting
Mistake must go to the essence of the bargain; mutual mistake most likely to get relief
If essential purpose impossible, then

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SOF
Minor Contracts
Unenforceable, voidable and void Ks
ILLEGAL CONTRACTS
Contracts can be rendered illegal based upon public policy
Bovard v. American Horse Enterprises
The burden is on the defendant to show that its enforcement would be in violation
of the settled public policy of this state or injurious to the morals of its people.
Before labeling a contract as being contrary to public policy, courts must carefully
inquire into:
1. the nature of the conduct,
2. the extent of public harm which may be involved, and
3. the moral quality of the conduct of the parties in light of the prevailing
standards of the community.
If the court finds the K violates public policy, then it is an illegal contract. At that
point, the court leaves the parties to an illegal K where it finds them.
A promise or other term of an agreement is unenforceable on grounds of public
policy if legislation provides that it is unenforceable or the interest in its
enforcement is clearly outweighed in the circumstances by a public policy against
such terms.
If one party is less at fault and seeks forgiveness, or is a person to be protected
by the law, then that party has a greater chance of getting relief, typically in the
form of restitution.
What are 4 equitable remedies that are not restitutionary?
1- Reformation
2- Injunction
3- Specific performance
4- Rescission
What are sources of Public Policy?
- statutes
- court opinions (common law)
- constitutions (federal and state)
- administrative regulations
- canons of professional responsibility
Distinction between unenforceable K and void contracts: Unenforceable K no
reason cant enter into, but something makes it unenforceable
Void is void from the beginning

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Note: Illegality is a defense to any legal remedy (can be used whether the remedy is
equitable or legal). Unclean hands is a defense to an equitable remedy.
R.R. v. M.H.
Surrogacy contracts. Here, the surrogate mother used the defense of violation of
public policy to avoid specific performance of the K. Thus, violation of public
policy used as a defense to specific performance.
Why do you have to appeal to public policy if there is a statute that makes baby selling
illegal?
In the face of an illegal K, no relief for either party, neither specific performance,
rescission or damages, court leaves the parties where it finds them.
In the face of unclean hands the court also leaves the parties where it finds them.
Surrogacy amt paid for expenses incurred in labor would be ok, if she still had 4 days
after pregnancy via statute, and K cant be for selling babies

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